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Minute
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Minutes of the Federal Open Market Committee
October 28â29, 2025
A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors on Tuesday, October 28, 2025, at 9:00 a.m. and continued on Wednesday, October 29, 2025, at 9:00 a.m.1
Developments in Financial Markets and Open Market Operations
The manager turned first to an overview of broad market developments during the intermeeting period. Market participants left their macroeconomic outlooks little changed, and they appeared to continue to interpret data made available over the period as consistent with a resilient economy. In line with the stable outlook, investors' expectations for the path of the policy rate, whether market based or survey based, were virtually unchanged over the period. Investors expected a 25 basis point lowering in the target range for the federal funds rate at the October meeting and another 25 basis point lowering at the December meeting, although some uncertainty around the December meeting was evident in responses to the Open Market Desk's Survey of Market Expectations (Desk survey) as well as in market prices.
The manager turned next to developments in Treasury markets and market-based measures of inflation compensation. Treasury yields were little changed, on net, over the period, consistent with stable expectations for the policy rate. Inflation compensation moved lower over the period, particularly for shorter tenors, with staff models attributing these recent movements to temporary factors.
Broad equity indexes continued to rise over the period, with the largest technology companies performing strongly on market participants' optimism about artificial intelligence (AI). The manager noted that rising stock prices were consistent with expectations for continued robust growth in earnings. Corporate bond spreads increased a bit this period but remained low in absolute terms. A couple of well-publicized bankruptcies, as well as some credit losses reported by some banks, led to increased investor scrutiny of credit markets, with investors reportedly closely tracking the riskiest segments of credit markets for signs of weakening and noting the possibility of future losses.
Regarding international developments, the manager noted that the trade-weighted dollar index rose somewhat over the period. Despite its recent appreciation, the dollar remained weaker against all major currencies since the beginning of the year, and outside forecasters continued to expect that the dollar would depreciate modestly over the medium term.
The manager highlighted that recent changes in money market conditions indicated that the level of reserves could be approaching ample. Rates on Treasury repurchase agreements (repo) moved notably higher relative to the interest rate on reserve balances (IORB). Investors attributed this movement to a decline in available liquidity amid ongoing balance sheet runoff and continued large Treasury debt issuance. Higher repo rates induced a fairly rapid increase in the effective federal funds rate (EFFR) relative to the IORB, with signs that the EFFR might increase further. The manager noted this increase was widespread, with many participants paying higher rates in the federal funds market regardless of their reasons for borrowing. Consistent with the move higher in repo rates, the overnight reverse repurchase agreement (ON RRP) facility had seen usage fall to de minimis levels. Meanwhile, the standing repo facility (SRF) was used more frequently over the period, albeit not in large volumes. Pressures in money markets resulted in notable movements in some other indicators of reserve ampleness. For example, payments by banks shifted to later in the day, suggesting that banks may have been economizing on reserves. In addition, the share of domestic banks borrowing in the federal funds market increased. The estimated elasticity of the EFFR with respect to changes in the supply of reserves was stable during the period. That outcome, however, was likely due to the aftereffects of the debt ceiling resolution, which likely affected the estimated elasticity. A related concept, the elasticity of repo rates to changes in repo volumes, increased significantly since late August.
The manager recommended that the Committee consider stopping the runoff of the System Open Market Account (SOMA) portfolio soon. Continuing runoff would imply that volatility in money markets likely would continue to intensify. He noted that excessive money market rate volatility would pose risks to both the control of the policy rate and the stability of funding in the repo market, which in turn could affect the stability of the U.S. Treasury market. The manager also noted that further reductions in the size of the portfolio may prove short lived because they would bring forward the time when the Desk would need to restart purchases of securities to maintain ample reserves.
The manager next discussed the expected trajectory of the balance sheet. Respondents to the Desk survey had come to expect an earlier date for the end of portfolio runoff. Market outreach suggested further revisions to expectations in the week after the survey concluded, and the staff estimated that if respondents had been asked more recently, almost half would have said they expected the Committee to announce an end to runoff at this meeting.
In the absence of material take-up at the ON RRP facility, and assuming balance sheet runoff would end, the staff estimated that reserves would continue to gradually decline amid projected increases in other Federal Reserve liabilities. At times, such as during quarter- and year-ends and tax dates, reserves were projected to dip to quite low levels. Against this backdrop, the staff would continue to monitor indicators of reserve conditions closely.
The manager noted that the Desk would begin using a new trading platform in the near future to conduct its repo and reverse repo operations, with other operations to follow in coming quarters. In addition, he informed the Committee that there were no intervention operations in foreign currencies for the SOMA during the intermeeting period.
By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period.
Special Topic: The Standing Repo Facility
The staff provided background on the SRF, including potential benefits and costs of central clearing for SRF transactions. The main potential benefit mentioned was greater effectiveness of the SRF in helping to maintain control of the federal funds rate. Central clearing could increase counterparties' willingness to use the SRF when there is upward pressure on repo rates, which would damp pressures on the federal funds rate. The main potential costs mentioned were increased systemic importance of providers of central clearing, the potential for central clearing of the SRF to enable greater nonbank leverage in the Treasury market, and the expansion of the Federal Reserve's footprint in financial markets.
Most participants commented on the potential for central clearing of SRF transactions.2 Among those who commented, almost all noted that the SRF supports the effective implementation and transmission of monetary policy as well as smooth market functioning, and that central clearing of SRF transactions could improve the effectiveness of the facility. A few participants raised concerns about risks associated with centrally clearing the SRF, including increased systemic importance of providers of central clearing. Participants who commented generally supported further study of central clearing of SRF transactions.
Special Topic: Balance Sheet Issues
The FOMC's "Plans for Reducing the Size of the Federal Reserve's Balance Sheet," announced in May 2022, indicated that the Committee intended to cease balance sheet runoff when reserve balances are judged to be somewhat above a level consistent with ample reserves. Since then, the size of the Federal Reserve's balance sheet had declined substantially. In addition, money market conditions had tightened recently, which suggested that reserve balances may be moving closer to ample. In light of these developments, participants discussed whether to stop balance sheet runoff soon and what the maturity composition of the SOMA Treasury portfolio (SOMA portfolio) should be in the longer run. Views on the latter would guide the investment of principal payments received on the Federal Reserve's holdings of agency securities as well as the composition of securities to be purchased once reserve management purchases would be needed. Consequently, participants agreed that their discussions at this meeting would help inform the Committee's future decisions regarding the long-run composition of the SOMA portfolio.
The participants' discussion was preceded by a staff presentation. The staff reviewed the composition of the SOMA portfolio and provided some considerations regarding the SOMA portfolio's long-run composition, including issues related to market functioning, potential macroeconomic implications, interactions with the Treasury's management of the federal debt, monetary policy implementation, and the Federal Reserve's net income. The presentation noted that the current share of Treasury bills in the SOMA portfolio was smaller than the bill share of total Treasury securities outstanding. The staff also noted that if the Committee preferred a SOMA portfolio with a proportional or greater share of Treasury bills relative to total outstanding, policymakers could wait to make that decision because the current share of Treasury bills in the portfolio was small and the monthly amounts of principal payments received on the Federal Reserve's holdings of agency securities that would need to be reinvested once balance sheet runoff stopped were modest.
Participants agreed that the recent tightening in money market conditions indicated that it would soon be appropriate to end balance sheet runoff and that reinvestments of principal payments received on agency securities holdings should be directed into Treasury bills. Various participants highlighted the need to continue to monitor money market conditions. Participants also agreed that a larger share of Treasury bills than the current portfolio allocation would be desirable in the long run. A larger share of Treasury bills would shift the SOMA portfolio composition toward that of Treasury securities outstanding. Many participants indicated that a greater share of Treasury bills could provide the Federal Reserve with more flexibility to accommodate changes in the demand for reserves or changes in nonreserve liabilities and thereby help to maintain an ample level of reserves. Several participants also noted that a greater share of Treasury bills could increase flexibility for future monetary policy accommodation without having to raise the level of reserves. The majority of participants indicated that a larger share of Treasury bills would also reduce Federal Reserve income volatility.
Some participants indicated that during a transition phase, purchases to reach a larger share of Treasury bills in the SOMA portfolio could reduce the availability of short-term Treasury securities to the private sector and potentially affect market functioning. They thus favored a measured approach to purchasing Treasury bills. A couple of other participants noted the absence of market functioning problems in past episodes when purchases focused on Treasury bills. A number of participants noted that the expected pace of paydowns of agency securities in the near term was around only $15 billion to $20 billion per month, and that redirecting these proceeds into Treasury bills once balance sheet runoff ended likely would not adversely affect market functioning.
Overall, most participants favored a long-run composition of the SOMA portfolio that matched the composition of Treasury securities outstanding, indicating that a proportional allocation would provide enough flexibility and may be simpler to communicate. Some participants indicated that they favored a larger-than-proportional share of Treasury bills, citing the benefits of having even greater flexibility than available under a proportional allocation. Various participants noted that it was not necessary to decide on the long-run composition of the SOMA portfolio at this time, as the shift toward a long-run composition would take place over a number of years.
Staff Review of the Economic Situation
The information available at the time of the meeting indicated that growth of real gross domestic product (GDP) had moderated over the first half of the year. Information on the labor market was limited by the federal government shutdown; however, available indicators were consistent with a continued gradual cooling in the labor market without any evidence of a sharp deterioration. Consumer price inflation had moved up since earlier in the year and remained somewhat elevated.
Total consumer price inflationâas measured by the 12-month change in the price index for personal consumption expenditures (PCE)âwas estimated to have been 2.8 percent in September based on data from the consumer price index. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, was also estimated to have been 2.8 percent in September. These estimates implied that total PCE price inflation had risen 0.5 percentage point relative to a year ago and that core PCE inflation was unchanged from its year-earlier rate.
Real GDP posted a strong gain in the second quarter following a decline in the first quarter, although the average increase over the first half of the year was slower than the average pace seen over 2024. Real private domestic final purchases (PDFP)âwhich comprises PCE and private fixed investment and which often provides a better signal of underlying economic momentum than GDPâhad risen faster than GDP over the first half but had also slowed relative to its 2024 rate of increase. PDFP growth appeared to have continued at a solid pace in the third quarter, though the government shutdown had reduced the amount of data that was available to gauge third-quarter economic activity. Available data suggested that net exports positively contributed to GDP growth in the third quarter. After falling sharply in the second quarter and then rising somewhat in July, real imports of goods appeared to have resumed falling in August. U.S. real goods exports appeared to have declined moderately in August after having increased modestly in the first half of the year. The government shutdown was expected to reduce GDP growth for as long as it continued, with a corresponding boost to growth once the government reopened and government production and purchases returned to normal levels.
Recent activity indicators suggested that foreign real GDP growth slowed in the third quarter relative to the first half of the year. Growth in China softened amid fading fiscal stimulus and a persistent property-sector downturn, while indicators in Europe continued to point to subdued activity. Slower foreign growth was driven in part by weaker exports due to reduced U.S. demand and lower investment due to elevated uncertainty, likely reflecting the effects of the U.S. tariffs. Growth in some foreign economies, especially in Mexico and parts of Asia, was supported by continued strong demand for high-tech products, originating primarily from the U.S.
Headline inflation was near central banks' targets in many foreign economies, aided by declines in global energy prices. However, core inflation remained elevated in some economies, notably Brazil, Mexico, and the U.K. By contrast, inflation in China continued to be subdued. In response to lackluster economic activity, some foreign central banksâincluding the Bank of Canada, the Sveriges Riksbank, and the Bank of Mexicoâcut their policy rates further over the intermeeting period.
Staff Review of the Financial Situation
Over the intermeeting period, both the market-implied expected path of the federal funds rate through the end of 2026 and nominal Treasury yields were little changed on net. At short maturities, real yields rose somewhat as measures of inflation compensation decreased amid declines in oil prices. At longer maturities, real yields and inflation compensation were little changed on net.
Broad equity price indexes increased moderately, boosted by technology firms with positive earnings news and AI-related investor optimism. Credit spreads were little changed, on net, and remained very low by historical standards. The one-month option-implied volatility on the S&P 500 index was largely unchanged, on net, and remained near the median of its historical distribution.
Risk appetite in foreign financial markets was generally strong. On net, foreign equity indexes were moderately higher, and technology stocks outperformed in several economies, largely reflecting continued investor optimism regarding AI. Market-based policy expectations and longer-term yields declined in most major advanced foreign economies, in part because of weak economic data. By contrast, yields in Japan rose amid political developments that led to expectations for increased fiscal spending. The broad dollar index increased modestly, primarily driven by the relative strength of U.S. economic data.
Conditions in U.S. short-term funding markets tightened materially over the intermeeting period but remained orderly. Late in the period, the spread between the EFFR and the IORB reached the narrowest level since the runoff of the Federal Reserve's balance sheet began in 2022. The Secured Overnight Financing Rate occasionally printed above the minimum bid rate at the SRF, and SRF take-up occurred on several days. The average usage of the ON RRP facility fell to its lowest level since 2021. Taken together, these developments suggested that reserve balances were moving closer to ample levels.
In domestic credit markets, borrowing costs of businesses, households, and municipalities remained significantly lower than the highs observed in 2023 but elevated relative to their average postâGlobal Financial Crisis levels. Yields on corporate bonds and leveraged loans edged down. Rates on 30-year fixed-rate conforming residential mortgages were little changed on net. Yields on commercial mortgage-backed securities (CMBS) moved up modestly. Interest rates on credit card accounts edged up a touch in August.
Credit remained generally available but relatively tight for small businesses. Issuance of corporate bonds, leveraged loans, and private credit was robust in recent months. Core loans on banks' books continued to increase in the third quarter, driven primarily by strong growth in commercial and industrial (C&I) lending. In the residential mortgage market, credit remained easily available for high-credit-score borrowers but less so for low-score borrowers. Consumer credit remained generally available for most households.
Banks in the October Senior Loan Officer Opinion Survey on Bank Lending Practices reported, on net, an easing in bank lending conditions on C&I loans for large firms and those with low exposures to international trade. Banks also eased standards for commercial real estate loans, credit cards, and auto loans over the third quarter. The overall level of bank lending standards aggregated across all loan categories was estimated to be around the median level observed since 2011.
Credit quality was generally stable at levels somewhat weaker than during the pre-pandemic period. The credit performance of corporate bonds, leveraged loans, and private credit remained stable. The use of distressed exchanges among leveraged loan borrowers and payment-in-kind interest among private credit borrowers, however, remained elevated. Delinquency rates on small business loans continued to be moderately above pre-pandemic levels, and those on CMBS remained elevated through September. Delinquency rates on most mortgage loan types, by contrast, stayed near historical lows. Credit card delinquency rates inched down in September, while auto loan delinquency rates ticked up, and both rates stood above their pre-pandemic levels.
The staff provided an updated assessment of the stability of the U.S. financial system and, on balance, continued to characterize the system's financial vulnerabilities as notable. The staff judged that asset valuation pressures were elevated. For public equities, price-to-earnings ratios stood at the upper end of their historical distribution. Nonprice indicators, such as the number of newly launched leveraged exchanged-traded products, also reflected high and broad-based investor demand for risky assets.
Vulnerabilities associated with nonfinancial business and household debt were characterized as moderate. Corporate debt grew modestly over the past few years, and household balance sheets remained strong. The rapid growth of private credit moderated somewhat, but recent bankruptcies raised concerns about credit quality and hidden leverage in this market. House prices remained high but flattened out in the past year, and the likelihood of severe distress among mortgage borrowers appeared to be notably lower than following the previous period of elevated house prices, in part because of stronger underwriting standards and near historical highs for homeowners' equity.
Vulnerabilities associated with leverage in the financial sector were characterized as notable. Hedge fund leverage, on average, remained elevated and increased further, driven by both a shift toward more leveraged strategies and an increase in leverage within strategies. Available data suggested that hedge fund exposure to Treasury markets doubled over the past two years. By contrast, banks remained resilient, with high regulatory capital ratios and improved funding structure, although their market-adjusted capital ratios remained depressed and sensitive to long-term interest rates.
Vulnerabilities associated with funding risks were characterized as moderate. The amount of total short-run funding instruments and cash management vehicles as a fraction of GDP grew in recent years but remained in the middle of its historical range. The total market capitalization of stablecoins, some of which may be vulnerable to runs, grew significantly in the past two years.
Staff Economic Outlook
Relative to the forecast prepared for the September meeting, real GDP growth was projected to be modestly stronger, on balance, through 2028, reflecting stronger expected potential output growth and greater projected support from financial conditions. GDP growth after 2025 was expected to remain above potential until 2028 as the drag from higher tariffs waned, with financial conditions becoming a tailwind for spending. As a result, the unemployment rate was expected to decline gradually after this year before flattening out at a level slightly below the staff's estimate of the natural rate of unemployment.
The staff's inflation forecast was broadly similar to the one prepared for the September meeting, with tariff increases expected to put upward pressure on inflation in 2025 and 2026. Thereafter, inflation was projected to return to its previous disinflationary trend.
The staff continued to view the uncertainty around the forecast as elevated, citing a cooling labor market, still-elevated inflation, heightened uncertainty about government policy changes and their effects on the economy, and the limited availability of data caused by the government shutdown. Risks around the employment and GDP forecasts continued to be seen as skewed to the downside, as elevated economic uncertainty and a cooling labor market raised the risk of a sharper-than-expected weakening in labor market conditions and output growth. Risks around the inflation forecast continued to be seen as skewed to the upside, as the elevated levels of some measures of expected inflation and more than four consecutive years of actual inflation above 2 percent raised the possibility that this year's projected rise in inflation would prove to be more persistent than the staff anticipated.
Participants' Views on Current Conditions and the Economic Outlook
In their discussion of inflation, participants observed that overall inflation had moved up since earlier in the year and remained somewhat above the Committee's 2 percent longer-run goal. Participants generally noted that core inflation had remained elevated, as disinflation in housing services had been more than offset by higher goods inflation, reflecting in part the effects of tariff increases implemented earlier in the year. Several participants observed that, setting aside their estimates of tariff effects, inflation was close to the Committee's target. Many participants, however, remarked that overall inflation had been above target for some time and had shown little sign of returning sustainably to the 2 percent objective in a timely manner.
Participants generally expected inflation to remain somewhat elevated in the near term before moving gradually to 2 percent. Several participants pointed to the persistence in core nonhousing services inflation as a factor that may keep overall inflation above 2 percent in the near term. Many participants expected some additional pickup in core goods inflation over the next few quarters, driven in part by further pass-through of tariffs to firms' pricing. Several participants expressed uncertainty about the timing and magnitude of tariff-related price effects, noting that some businesses were reportedly waiting to adjust prices until tariff policies seemed more settled. Drawing on reports from their District contacts, several participants remarked that businesses, including those not directly affected by tariffs, indicated that they planned to raise prices gradually in response to higher tariff-related input costs. A few participants suggested that potential recent productivity gains achieved through automation and AI may help businesses support their profit margins and limit the extent to which cost increases are passed on to consumers. A few participants commented that the softer labor market would likely help keep inflationary pressures in check. A couple of participants noted that recent changes in immigration policies would lessen housing demand and strengthen the disinflation in housing services prices.
Participants generally noted that most measures of short-term inflation expectations had eased somewhat from their peaks earlier in the year and that most survey-based and market-based measures of longer-term inflation have shown little net change since the end of last year, which suggested that longer-term inflation expectations remained well anchored. Participants emphasized the importance of maintaining well-anchored inflation expectations to help return inflation to the Committee's 2 percent objective in a timely manner, and many noted concerns that the prolonged period of above-target inflation could risk an increase in longer-term expectations.
With regard to the labor market, participants observed that the data available before the government shutdown indicated that job gains had slowed this year and that the unemployment rate had edged up but remained low through August. Participants commented on the lack of the Employment Situation report for September during this intermeeting period and reported relying on private-sector and limited government data, as well as information provided by businesses and community contacts, to assess labor market conditions. Participants pointed to recent available indicators, including survey-based measures of job availability, as being consistent with layoffs and hiring having remained low as well as a labor market that had gradually softened through September and October but had not sharply deteriorated. Participants generally attributed the slowdown in job creation to both reduced labor supplyâstemming from lower immigration and labor force participationâand less labor demand amid moderate economic growth and elevated uncertainty. Many participants remarked that structural factors such as investment related to AI and other productivity-enhancing technologies may be contributing to softer labor demand.
Regarding the outlook for the labor market, participants generally expected conditions to soften gradually in coming months and the labor market to remain less dynamic than earlier in the year, with businesses reluctant to add workers but also hesitant to lay off employees. Several participants described the lack of job turnover and hesitancy among businesses to add jobs as adding downside risks to the labor market, noting that a further weakening in labor demand could push the unemployment rate sharply higher. A few participants viewed the rise in the unemployment rates for groups historically more sensitive to cyclical changes in economic activity, or the concentration of job gains in less-cyclical sectors, as signaling potential broader labor market weakness. Some participants noted the apparent divergence between subdued job growth and moderate GDP growth, with several suggesting that this pattern might persist over time as advances in AI boost productivity growth while demographic factors constrain labor supply.
Participants noted that available indicators suggested that economic activity appeared to have been expanding at a moderate pace, although a number of participants observed that the lack of government-provided spending data since the shutdown made it challenging to gauge the more recent strength of overall activity. Participants generally noted that consumer spending had shown signs of firming in recent months after the slowdown observed early in the year. Many participants, however, remarked on a divergence in spending patterns across income groups, noting that consumption growth appeared to be disproportionately supported by higher-income households benefiting from strong equity markets, while lower-income households demonstrated increased price sensitivity and spending adjustments in response to high prices and elevated economic uncertainty. A couple of participants expressed concern about the relatively narrow base of support for consumption growth, noting the potential vulnerability should high-income consumer spending weaken. A couple of participants mentioned continued weakness in the housing market, despite some recent signs of stabilization, and that housing-affordability challenges remained a significant constraint on the sector.
Regarding the business sector, many participants highlighted strong investment in technology, particularly spending related to AI and data centers. Some participants suggested that those investments could boost productivity and thus aggregate supply. A few participants noted that lower business taxes or further expected easing in government regulations would likely support business activity and productivity growth over time. Some participants remarked that financial conditions were supportive of economic activity. A few participants mentioned the persistent headwinds facing the agricultural sector from compressed profit margins due to low crop prices, elevated input costs, and retrenched demand from abroad.
Participants generally judged that uncertainty about the economic outlook remained elevated. Participants saw risks to both sides of the Committee's dual mandate, with many indicating that downside risks to employment had increased since earlier in the year, as the unemployment rate ticked up and the pace of job gains slowed, leaving the labor market more susceptible to any negative shock. Many participants continued to see upside risks to their inflation outlook, pointing to the possibility that elevated inflation could prove more persistent than currently expected even after the effects of this year's tariff increases fade. A few participants remarked on the risk that trade tensions could disrupt global supply chains and weigh on overall economic activity. Many participants observed that the divergence between solid economic growth and weak job creation created a particularly challenging environment for policy decisions, requiring careful monitoring of incoming data to distinguish between cyclical weakness and structural changes in the relationship between output and employment. When discussing uncertainty, various participants expressed concern about the potential effect of a prolonged government shutdown, both on near-term economic activity and on the ability to accurately assess economic conditions because of limitations to the availability of federal government data. Several participants, however, remarked that other private and public indicators, as well as information in the Beige Book and obtained from District contacts, continued to provide useful signals about economic conditions.
In their discussion of financial stability, a number of participants pointed to some recent failures of firms involved in nonbank credit activity. These participants suggested that there were various reasons for concern about developments in the private credit sector, which included risks related to loan quality, the sector's funding practices, poor underwriting and collateral practices, banks' exposure to the sector, and the possibility of the transmission of strains in the sector to the real economy. A few participants noted that recent years' growth in private credit was an example of traditional financial activity moving outside the existing U.S. regulatory framework. Some participants commented on stretched asset valuations in financial markets, with several of these participants highlighting the possibility of a disorderly fall in equity prices, especially in the event of an abrupt reassessment of the possibilities of AI-related technology. A couple of participants cited risks associated with high levels of corporate borrowing.
In their consideration of monetary policy at this meeting, participants noted that inflation had moved up since earlier in the year and remained somewhat elevated. Participants further noted that available indicators suggested that economic activity had been expanding at a moderate pace. They observed that job gains had slowed this year and that the unemployment rate had edged up but remained low through August. Participants assessed that more recent indicators were consistent with these developments. In addition, they judged that downside risks to employment had risen in recent months. Against this backdrop, many participants were in favor of lowering the target range for the federal funds rate at this meeting, some supported such a decision but could have also supported maintaining the level of the target range, and several were against lowering the target range. Those who favored or could have supported a lowering of the target range for the federal funds rate toward a more neutral setting generally observed that such a decision was appropriate because downside risks to employment had increased in recent months and upside risks to inflation had diminished since earlier this year or were little changed. Those who preferred to keep the target range for the federal funds rate unchanged at this meeting expressed concern that progress toward the Committee's inflation objective had stalled this year, as inflation readings increased, or that more confidence was needed that inflation was on a course toward the Committee's 2 percent objective, while also noting that longer-term inflation expectations could rise should inflation not return to 2 percent in a timely manner. One participant agreed with the need to move toward a more neutral monetary policy stance but preferred a 1/2 percentage point reduction at this meeting. In light of their assessment that reserve balances had reached or were approaching ample levels, almost all participants noted that it was appropriate to conclude the reduction in the Committee's aggregate securities holdings on December 1 or that they could support such a decision.
In considering the outlook for monetary policy, participants expressed a range of views about the degree to which the current stance of monetary policy was restrictive. Some participants assessed that the Committee's policy stance would be restrictive even after a potential 1/4 percentage point reduction in the policy rate at this meeting. By contrast, some participants pointed to the resilience of economic activity, supportive financial conditions, or estimates of short-term real interest rates as indicating that the stance of monetary policy was not clearly restrictive. In discussing the near-term course of monetary policy, participants expressed strongly differing views about what policy decision would most likely be appropriate at the Committee's December meeting. Most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate as the Committee moved to a more neutral policy stance over time, although several of these participants indicated that they did not necessarily view another 25 basis point reduction as likely to be appropriate at the December meeting. Several participants assessed that a further lowering of the target range for the federal funds rate could well be appropriate in December if the economy evolved about as they expected over the coming intermeeting period. Many participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for the rest of the year. All participants agreed that monetary policy was not on a preset course and would be informed by a wide range of incoming data, the evolving economic outlook, and the balance of risks.
In discussing risk-management considerations that could bear on the outlook for monetary policy, participants generally judged that upside risks to inflation remained elevated and that downside risks to employment were elevated and had increased since the first half of the year. Many participants agreed that the Committee should be deliberate in its policy decisions against the backdrop of these two-sided risks and reduced availability of key economic data. Most participants suggested that, in moving to a more neutral policy stance, the Committee was helping forestall the possibility of a major deterioration in labor market conditions. Many of these participants also judged that, with more evidence having accumulated that the effect on overall inflation of this year's higher tariffs would likely be limited, it was appropriate for the Committee to ease its policy stance in response to downside risks to employment. Most participants noted that, against a backdrop of elevated inflation readings and a very gradual cooling of labor market conditions, further policy rate reductions could add to the risk of higher inflation becoming entrenched or could be misinterpreted as implying a lack of policymaker commitment to the 2 percent inflation objective. Participants judged that a careful balancing of risks was required and agreed on the importance of well-anchored longer-term inflation expectations in achieving the Committee's dual-mandate objectives.
Committee Policy Actions
In their discussions of monetary policy for this meeting, members agreed that available indicators suggested that economic activity had been expanding at a moderate pace. They also agreed that job gains had slowed this year and that the unemployment rate had edged up but remained low through August. Members observed that more recent indicators were consistent with these developments. They noted that inflation had moved up since earlier in the year and remained somewhat elevated. They agreed that the Committee was attentive to the risks to both sides of its dual mandate and that downside risks to employment had risen in recent months.
In support of the Committee's goals and in light of the shift in the balance of risks, almost all members decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent. Two members voted against that decision. One of these members preferred to lower the target range 1/2 percentage point, while the other member preferred to leave the target range unchanged. Almost all members agreed to conclude the reduction of the Committee's securities holdings on December 1. One member who voted against the Committee's policy rate decision at the meeting also preferred an immediate end to balance sheet runoff. Members agreed that, in considering additional adjustments to the target range for the federal funds rate, the Committee would carefully assess incoming data, the evolving outlook, and the balance of risks. All members agreed that the postmeeting statement should affirm their strong commitment both to supporting maximum employment and to returning inflation to the Committee's 2 percent objective.
Members agreed that, in assessing the appropriate stance of monetary policy, the Committee would continue to monitor the implications of incoming information for the economic outlook. They would be prepared to adjust the stance of monetary policy if risks emerged that could impede the attainment of the Committee's goals. Members also agreed that their assessments would take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
At the conclusion of the discussion, the Committee voted to direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.:
"Effective October 30, 2025, the Federal Open Market Committee directs the Desk to:
Undertake open market operations as necessary to maintain the federal funds rate in a target range of 3-3/4 to 4 percent.
Conduct standing overnight repurchase agreement operations with a minimum bid rate of 4.0 percent and with an aggregate operation limit of $500 billion.
Conduct standing overnight reverse repurchase agreement operations at an offering rate of 3.75 percent and with a per-counterparty limit of $160 billion per day.
Roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing in October and November that exceeds a cap of $5 billion per month. Redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap. Beginning on December 1, roll over at auction all principal payments from the Federal Reserve's holdings of Treasury securities.
Reinvest the amount of principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities (MBS) received in October and November that exceeds a cap of $35 billion per month into Treasury securities to roughly match the maturity composition of Treasury securities outstanding. Beginning on December 1, reinvest all principal payments from the Federal Reserve's holdings of agency securities into Treasury bills.
Allow modest deviations from stated amounts for reinvestments, if needed for operational reasons."
The vote also encompassed approval of the statement below for release at 2:00 p.m.:
"Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.
In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee decided to conclude the reduction of its aggregate securities holdings on December 1. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments."
Voting for this action: Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Austan D. Goolsbee; Philip N. Jefferson; Alberto G. Musalem; and Christopher J. Waller.
Voting against this action: Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 1/2 percentage point at this meeting, and Jeffrey R. Schmid, who preferred no change to the target range for the federal funds rate at this meeting.
Consistent with the Committee's decision to lower the target range for the federal funds rate to 3-3/4 to 4 percent, the Board of Governors of the Federal Reserve System voted unanimously to lower the interest rate paid on reserve balances to 3.90 percent, effective October 30, 2025. The Board of Governors of the Federal Reserve System voted unanimously to approve a 1/4 percentage point decrease in the primary credit rate to 4.0 percent, effective October 30, 2025.3
It was agreed that the next meeting of the Committee would be held on TuesdayâWednesday, December 9â10, 2025. The meeting adjourned at 10:20 a.m. on October 29, 2025.
Notation Vote
By notation vote completed on October 7, 2025, the Committee unanimously approved the minutes of the Committee meeting held on September 16â17, 2025.
Attendance
Jerome H. Powell, Chair
John C. Williams, Vice Chair
Michael S. Barr
Michelle W. Bowman
Susan M. Collins
Lisa D. Cook
Austan D. Goolsbee
Philip N. Jefferson
Stephen I. Miran
Alberto G. Musalem
Jeffrey R. Schmid
Christopher J. Waller
Beth M. Hammack, Neel Kashkari, Lorie K. Logan, Anna Paulson, and Sushmita Shukla, Alternate Members of the Committee
Thomas I. Barkin, Raphael W. Bostic, and Mary C. Daly, Presidents of the Federal Reserve Banks of Richmond, Atlanta, and San Francisco, respectively
Joshua Gallin, Secretary
Matthew M. Luecke, Deputy Secretary
Brian J. Bonis, Assistant Secretary
Michelle A. Smith, Assistant Secretary
Mark E. Van Der Weide, General Counsel
Richard Ostrander, Deputy General Counsel
Trevor A. Reeve, Economist
Stacey Tevlin, Economist
Beth Anne Wilson, Economist
Brian M. Doyle, Carlos Garriga, Joseph W. Gruber, and William Wascher, Associate Economists
Roberto Perli, Manager, System Open Market Account
Julie Ann Remache, Deputy Manager, System Open Market Account
Daniel Aaronson, Interim Director of Research, Federal Reserve Bank of Chicago
Stephanie R. Aaronson, Senior Associate Director, Division of Research and Statistics, Board
Jose Acosta, Senior System Engineer II, Division of Information Technology, Board
Roc Armenter, Executive Vice President, Federal Reserve Bank of Philadelphia
Alyssa Arute,4 Assistant Director, Division of Reserve Bank Operations and Payment Systems, Board
Alessandro Barbarino, Special Adviser to the Board, Division of Board Members, Board
Julia Barmeier,4 Lead Financial Institution Policy Analyst, Division of Reserve Bank Operations and Payment Systems, Board
William F. Bassett, Senior Associate Director, Division of Financial Stability, Board
Jose Berrospide, Assistant Director, Division of Financial Stability, Board
Paola Boel, Vice President, Federal Reserve Bank of Cleveland
Erik Bostrom,4 Senior Financial Institution Policy Analyst I, Division of Monetary Affairs, Board
David Bowman,4 Senior Associate Director, Division of Monetary Affairs, Board
Nina Boyarchenko, Financial Research Advisor, Federal Reserve Bank of New York
Falk Braeuning, Vice President, Federal Reserve Bank of Boston
Christian V. Cabanilla,4 Policy Advisor, Federal Reserve Bank of New York
Michele Cavallo, Special Adviser to the Board, Division of Board Members, Board
Kathryn B. Chen,4 Director of Cross Portfolio Policy and Analysis, Federal Reserve Bank of New York
Andrew Cohen,5 Special Adviser to the Board, Division of Board Members, Board
Stephanie E. Curcuru, Deputy Director, Division of International Finance, Board
Marnie Gillis DeBoer,6 Senior Associate Director, Division of Monetary Affairs, Board
Anthony M. Diercks, Principal Economist, Division of Monetary Affairs, Board
Cynthia L. Doniger,4 Principal Economist, Division of Monetary Affairs, Board
Burcu Duygan-Bump, Associate Director, Division of Research and Statistics, Board
Giovanni Favara, Deputy Associate Director, Division of Monetary Affairs, Board
Laura J. Feiveson,7 Special Adviser to the Board, Division of Board Members, Board
Erin E. Ferris,4 Principal Economist, Division of Monetary Affairs, Board
Andrew Figura, Associate Director, Division of Research and Statistics, Board
Aaron Flaaen, Principal Economist, Division of International Finance, Board
Glenn Follette, Associate Director, Division of Research and Statistics, Board
Greg Frischmann, Senior Special Counsel, Legal Division, Board; Special Adviser to the Board, Division of Board Members, Board
Jamie Grasing,4 Senior Data Engineer, Division of Monetary Affairs, Board
Brian Greene,4 Associate Director, Federal Reserve Bank of New York
James Hebden, Principal Economic Modeler, Division of Monetary Affairs, Board
Valerie S. Hinojosa, Section Chief, Division of Monetary Affairs, Board
Matteo Iacoviello, Senior Associate Director, Division of International Finance, Board
Jane E. Ihrig, Special Adviser to the Board, Division of Board Members, Board
Sebastian Infante,4 Section Chief, Division of Monetary Affairs, Board
Benjamin K. Johannsen, Assistant Director, Division of Monetary Affairs, Board
Callum Jones, Principal Economist, Division of Monetary Affairs, Board
Michael T. Kiley, Deputy Director, Division of Monetary Affairs, Board
Elizabeth Klee, Deputy Director, Division of Monetary Affairs, Board
Michael Koslow,4 Associate Director, Federal Reserve Bank of New York
Anna R. Kovner, Executive Vice President, Federal Reserve Bank of Richmond
Seung Kwak, Senior Economist, Division of Monetary Affairs, Board
Britt Leckman,8 Federal Reserve Board Staff Photographer, Division of Board Members, Board
Andreas Lehnert, Director, Division of Financial Stability, Board
Eric B. Lewin,4 Assistant General Counsel, Federal Reserve Bank of New York
Kurt F. Lewis, Special Adviser to the Chair, Division of Board Members, Board
Laura Lipscomb, Special Adviser to the Board, Division of Board Members, Board
Byron Lutz, Deputy Associate Director, Division of Research and Statistics, Board
Dina Tavares Marchioni,9 Director of Money Markets, Federal Reserve Bank of New York
Benjamin W. McDonough, Deputy Secretary and Ombudsman, Office of the Secretary, Board
Alisdair G. McKay, Monetary Advisor, Federal Reserve Bank of Minneapolis
Kindra I. Morelock, Information Services Senior Analyst, Division of Monetary Affairs, Board, and Federal Reserve Bank of Chicago
Norman J. Morin, Associate Director, Division of Research and Statistics, Board
David Na,4 Acting Group Manager, Division of Monetary Affairs, Board
Edward Nelson, Senior Adviser, Division of Monetary Affairs, Board
Anna Nordstrom, Head of Markets, Federal Reserve Bank of New York
Caterina Petrucco-Littleton,10 Deputy Associate Director, Division of Consumer and Community Affairs, Board; Special Adviser to the Board, Division of Board Members, Board
Brian Phillips,5 Special Adviser to the Board, Division of Board Members, Board
Eugenio P. Pinto,7 Special Adviser to the Board, Division of Board Members, Board
Christine Repper,11 Manager, Division of Reserve Bank Operations and Payment Systems, Board
William E. Riordan,4 Capital Markets Trading Advisor, Federal Reserve Bank of New York
Samuel Schulhofer-Wohl, Senior Vice President, Federal Reserve Bank of Dallas
Kirk Schwarzbach, Special Assistant to the Board, Division of Board Members, Board
Zeynep Senyuz, Special Adviser to the Board, Division of Board Members, Board
John J. Stevens, Senior Associate Director, Division of Research and Statistics, Board
Mary H. Tian,4 Group Manager, Division of Monetary Affairs, Board
Paula Tkac, Director of Research, Federal Reserve Bank of Atlanta
Annette Vissing-Jørgensen, Senior Adviser, Division of Monetary Affairs, Board
Jeffrey D. Walker,4 Senior Associate Director, Division of Reserve Bank Operations and Payment Systems, Board
Eric Wallerstein, Special Adviser to the Board, Division of Board Members, Board
Daniel Wilson, Vice President, Federal Reserve Bank of San Francisco
Evan Winerman,4 Deputy Associate General Counsel, Legal Division, Board
Emre Yoldas, Deputy Associate Director, Division of International Finance, Board
Filip Zikes, Special Adviser to the Board, Division of Board Members, Board
_______________________
Joshua Gallin
Secretary
1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes; the Board of Governors of the Federal Reserve System is referenced as the "Board" in these minutes. Return to text
2. The discussion summarized here draws from remarks made by participants during various portions of the meeting, as the agenda did not include a separate policymaker discussion about the SRF. Return to text
3. In taking this action, the Board approved requests to establish that rate submitted by the Board of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Richmond, Atlanta, Chicago, Dallas, and San Francisco. The vote also encompassed approval by the Board of Governors of the establishment of a 4.0 percent primary credit rate by the remaining Federal Reserve Banks, effective on October 30, 2025, or the date such Reserve Banks inform the Secretary of the Board of such a request. (Secretary's note: Subsequently, the Federal Reserve Banks of Cleveland, St. Louis, Minneapolis, and Kansas City were informed of the Board's approval of their establishment of a primary credit rate of 4.0 percent, effective October 30, 2025.) Return to text
4. Attended through the discussion of balance sheet issues. Return to text
5. Attended the discussion of economic developments and the outlook. Return to text
6. Attended through the discussion of developments in financial markets and open market operations. Return to text
7. Attended through the discussion of balance sheet issues, and from the discussion of current monetary policy through the end of the meeting. Return to text
8. Attended opening remarks for Tuesday's session only. Return to text
9. Attended through the discussion of economic developments and the outlook. Return to text
10. Attended Wednesday's session only. Return to text
11. Attended Tuesday's session only. Return to text
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2025-10-29
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2025-10-29
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Statement
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Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.
In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee decided to conclude the reduction of its aggregate securities holdings on December 1. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Austan D. Goolsbee; Philip N. Jefferson; Alberto G. Musalem; and Christopher J. Waller. Voting against this action were Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 1/2 percentage point at this meeting, and Jeffrey R. Schmid, who preferred no change to the target range for the federal funds rate at this meeting.
For media inquiries, please email [email protected] or call 202-452-2955.
Implementation Note issued October 29, 2025
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2025-09-17
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2025-09-17
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Statement
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Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen.
In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4 to 4â1/4 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgageâbacked securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Austan D. Goolsbee; Philip N. Jefferson; Alberto G. Musalem; Jeffrey R. Schmid; and Christopher J. Waller. Voting against this action was Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 1/2 percentage point at this meeting.
For media inquiries, please email [email protected] or call 202-452-2955.
Implementation Note issued September 17, 2025
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2025-09-17
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2025-10-08
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Minute
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Minutes of the Federal Open Market Committee
September 16â17, 2025
A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors on Tuesday, September 16, 2025, at 10:30 a.m. and continued on Wednesday, September 17, 2025, at 9:00 a.m.1
Developments in Financial Markets and Open Market Operations
The deputy manager turned first to an overview of financial market developments during the intermeeting period. Markets appeared to interpret data releases and FOMC communications as indicating that the baseline outlook was little changed but that downside risks to the labor market had increased. Median modal expectations for personal consumption expenditures (PCE) inflation this year and next from the Open Market Desk's Survey of Market Expectations (Desk survey) increased only slightly, and expectations for the unemployment rate increased only marginally overall. However, after the weaker-than-expected July and August employment reports, investors' focus shifted to downside risks to the labor market.
Near-term expectations for the policy rate had moved lower in response to weaker-than-expected employment data and the apparent rise in downside employment risks. Almost all respondents to the Desk survey expected a 25 basis point cut in the target range for the federal funds rate at this meeting, and around half expected an additional cut at the October meeting. The vast majority of survey respondents expected at least two 25 basis point cuts by year-end, with around half expecting three cuts over that time. Respondents' expectations for 2027 and beyond were unchanged, implying that revisions to respondents' near-term expectations reflected an anticipation of a faster return of the federal funds rate to its longer-run level than previously expected. Market-based measures of policy rate expectations were broadly consistent with responses to the Desk survey, reflecting about three 25 basis point cuts by the end of the year.
The deputy manager then discussed developments in Treasury markets and market-based measures of inflation compensation. Nominal Treasury yields fell 20 to 40 basis points over the intermeeting period, with the largest decline occurring at the short end of the yield curve; the curve therefore steepened. Staff models indicated that nearly all the decline in short-term rates was attributable to the shift down in policy rate expectations. Market-based measures of inflation compensation fell slightly over the intermeeting period.
Equity prices continued to rise over the intermeeting period and stood very close to record highs despite the recent weaker-than-expected employment reports. The deputy manager noted this development was consistent with the benign baseline macroeconomic outlook incorporated in most private-sector forecasts and strong realized earnings in technology and other sectors. Corporate bond spreads were little changed over the intermeeting period and remained at tight levels, signaling that investors anticipated relatively moderate credit losses.
Regarding foreign exchange developments, the deputy manager noted that the broad trade-weighted dollar index had generally stabilized and that the dollar returned to trading roughly in line with fundamental macroeconomic drivers over the intermeeting period. The available data continued to suggest foreign demand for U.S. assets remained resilient.
The deputy manager turned next to money markets. The effective federal funds rate remained stable, and repurchase agreement (repo) rates moved higher over the intermeeting period. The increase in repo rates over the period was driven by the increase in net Treasury bill issuance amid the rebuilding of the Treasury General Account (TGA) following the debt ceiling resolution, continued large Treasury coupon issuance, and ongoing reductions in the Federal Reserve's balance sheet. Reserves fell sharply on September 15 in response to an increase in the TGA, driven by tax receipts and significant net issuance of Treasury coupon securities. Repo rates came under additional upward pressure that day, and take-up at the standing repo facility (SRF) reached $1.5 billion. There were some signs of slight upward pressure on rates in the federal funds market but not enough to move the effective federal funds rate. While key indicators remained consistent with abundant reserves, money market rates were expected to continue to increase over time relative to administered rates and to eventually pull the effective federal funds rate higher.
The deputy manager concluded by discussing the trajectory of the balance sheet. If balance sheet runoff were to continue at the current pace, the System Open Market Account (SOMA) portfolio was expected to decline to just over $6 trillion by the end of March, with Federal Reserve notes growing at a gradual pace, the TGA fluctuating around current levels, and usage of the overnight reverse repurchase agreement (ON RRP) facility remaining very low except on quarter-end dates. As a result, the deputy manager expected reserves to be close to the $2.8 trillion range by the end of the first quarter of next year if runoff were to continue at the current pace.
All but one member of the Committee voted to ratify the Desk's domestic transactions over the intermeeting period. Governor Stephen Miran, who had been sworn in as a member of the Board that morning, abstained from voting. There were no intervention operations in foreign currencies for the System's account during the intermeeting period.
Staff Review of the Economic Situation
The information available at the time of the meeting indicated that real gross domestic product (GDP) growth had moderated in the first half of the year. Although the unemployment rate continued to be low, the pace of employment increases had slowed, and labor market conditions had softened. Consumer price inflation remained somewhat elevated.
Total consumer price inflationâas measured by the 12-month change in the PCE price indexâwas estimated to have been 2.7 percent in August, based on the data from the consumer and producer price indexes. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, was estimated to have been 2.9 percent in August. Both inflation rates were at the upper end of their ranges since the beginning of the year.
Recent data indicated that labor market conditions had softened. The unemployment rate edged up to 4.3 percent in August, a little higher than it had been at the beginning of the year. The participation rate was somewhat lower in August than it was at the beginning of the year. Average monthly increases in total nonfarm payrolls over July and August were weak, and job gains were revised down notably in May and June. The Bureau of Labor Statistics' (BLS) preliminary estimate of the benchmark revision for April 2024 through March 2025 indicated that the level of payrolls for March was more than 900,000 lower than had been reported. The ratio of job vacancies to unemployed workers was 1.0 in August and remained within the narrow range seen over the past year. The employment cost index of hourly compensation for private-sector workers increased 3.5 percent over the 12 months ending in June, and average hourly earnings for all employees rose 3.7 percent over the 12 months ending in August. Both wage growth measures were lower than their year-earlier levels.
Real GDP rose in the second quarter after declining in the first quarter, but GDP growth over the first half as a whole was slower than last year. Growth of real private domestic final purchases (PDFP)âwhich comprises PCE and private fixed investment and which often provides a better signal than GDP of underlying economic momentumâhad also moderated in the first half relative to last year. Recent indicators for consumer spending and business investment spendingâparticularly for high-tech equipment and softwareâpointed to further moderate gains in PDFP in the third quarter, but housing-sector activity remained weak. After falling sharply in the second quarter, real imports of goods increased in July, particularly for capital goods. By contrast, exports edged down in July, following modest increases over the first half of the year.
Foreign GDP growth slowed markedly in the second quarter, as the transitory boost due to the front-loading of U.S. imports earlier in the year faded. Canadian economic activity contracted significantly, as exports of price-sensitive industrial supplies fell sharply in the face of higher U.S. tariffs. Economic growth in Mexico and parts of Asia was supported by strong demand for high-tech products.
Headline inflation was near central banks' targets in most foreign economies, aided by past declines in energy prices. However, core inflation remained persistently elevated in some economies, such as Brazil, Mexico, and the U.K. By contrast, inflation in China continued to be subdued. Several foreign central banksâincluding the European Central Bankâheld their policy rates steady, while othersâsuch as the Reserve Bank of New Zealand and the Reserve Bank of Australiaâresumed reducing their policy rates, as disinflation continued.
Staff Review of the Financial Situation
The market-implied path of the federal funds rate decreased notably over the intermeeting period. Options on interest rate futures suggested that market participants were placing a higher probability on greater policy easing by early 2026 than they had just before the July FOMC meeting. Consistent with the downward shift in the implied policy rate path, nominal Treasury yields declined notably, on net, particularly at shorter horizons. Changes in nominal yields were driven primarily by reductions in real Treasury yields as inflation compensation fell to a lesser degree, on net, across maturities.
Broad equity price indexes increased amid strong corporate earnings reports and expectations of lower policy rates, while credit spreads were little changed and remained very low by historical standards. The one-month option-implied volatility on the S&P 500 indexâthe VIXâended the period essentially unchanged, on net, at a moderate level.
Risk sentiment generally improved in global financial markets, supported by trade policy developments that were perceived as reducing negative tail risks to economic growth, strong corporate earnings, and lower interest rates in the U.S. On balance, foreign equity indexes rose moderately, credit spreads narrowed slightly, and the exchange value of the dollar declined modestly. Increased political uncertainty led to volatility of longer-term government bond yields in some advanced foreign economies.
Conditions in U.S. short-term funding markets remained orderly over the intermeeting period, and the FOMC's target policy rate continued to transmit to private rates in the usual manner. Following the increase in the federal debt limit in early July, TGA balances continued to increase, while usage of the ON RRP facility declined notably to its lowest levels since April 2021. Amid increases in the TGA, there were mild upward pressures in secured market rates over the July and August month-ends. Secured rates remained elevated in the lead-up to the mid-September tax and coupon issuance date. On September 15, the Secured Overnight Financing Rate temporarily printed above the minimum bid rate at the SRF amid $1.5 billion in take-up at the facility. Amid these movements in secured rates, the effective federal funds rate remained unchanged relative to the interest rate on reserve balances.
In domestic credit markets, borrowing costs generally declined but remained elevated relative to their average postâGlobal Financial Crisis (GFC) levels. Yields on corporate bonds decreased moderately, while yields on leveraged loans were little changed on net. Interest rates on commercial and industrial (C&I) and short-term business loans remained elevated relative to their post-GFC averages. Rates on 30-year fixed-rate conforming residential mortgages declined moderately, on net, and remained elevated. Yields on higher-rated tranches of commercial mortgage-backed securities (CMBS) moved down modestly, and those on lower-rated tranches of non-agency CMBS declined notably. Interest rates on existing credit card accounts continued to tick up through June, while offer rates on new credit cards were little changed.
Financing from capital markets remained broadly available for medium-sized and large businesses. Gross issuance of nonfinancial corporate bonds across credit categories continued at a strong pace in July and August, and issuance of leveraged loans was robust in recent months. Lending in private credit markets continued at a solid pace in July. After relatively strong growth in the second quarter, C&I loan balances on banks' books also continued to grow at a solid pace in July and August. Commercial real estate (CRE) loans continued to grow at a modest pace in July and August.
Credit remained available for most businesses, households, and municipalities, while credit continued to be relatively tight for small businesses and households with lower credit scores. In the residential mortgage market, credit remained easily available for high-credit-score borrowers who met standard conforming loan criteria but generally tight for low-credit-score borrowers. While consumer credit remained generally available for most households, the growth of revolving credit and auto loans was relatively weak in the second quarter.
Credit quality was generally stable at levels somewhat weaker than during the pre-pandemic period. The credit performance of corporate bonds and leveraged loans remained generally stable, though the default rate for leveraged loans that includes distressed exchanges continued to be elevated. Delinquency rates on small business loans in June and July ticked up and were moderately above pre-pandemic levels. In the CRE market, CMBS delinquency rates remained elevated through August. Regarding household credit quality, the delinquency rates on Federal Housing Administration mortgages remained at the upper end of their range over the past few years. By contrast, delinquency rates on most other mortgage loan types stayed near historical lows. In the second quarter, credit card and auto loan delinquency rates remained at elevated levels but were little changed.
Staff Economic Outlook
Compared with the staff forecast prepared for the July meeting, the projection of real GDP growth was revised up somewhat, on balance, for this year through 2028, primarily reflecting stronger-than-expected data for both consumer spending and business investment as well as financial conditions that were projected to be a little more supportive of output growth. GDP growth was still projected to be faster next year than this year, as the effects of tariff increases and slower net immigration were expected to diminish. The staff continued to expect that the labor market would soften further this year, though the projected path for the unemployment rate in following years was a little lower than in the previous staff forecast. The unemployment rate was projected to move slightly above the staff's estimate of its natural rate through the remainder of this year and then to decline later in the projection as GDP growth picked up.
The staff's inflation projection was only slightly revised from the one prepared for the July meeting. Tariff increases were still expected to raise inflation this year and to provide some further upward pressure on inflation in 2026. Inflation was projected to decline in 2026, to reach 2 percent in 2027, and to remain there in 2028.
The staff continued to view the uncertainty around the projection as elevated, primarily reflecting uncertainty regarding changes to economic policies, including those for trade, immigration, fiscal spending, and regulation, and their associated economic effects. Risks to employment and the labor market were judged to have become a little more tilted to the downside, stemming from the recent softening in labor market conditions amid modest real GDP growth. The staff continued to view the risks around the inflation forecast as skewed to the upside, as the projected rise in inflation this year could prove to be more persistent than assumed in the baseline projection.
Participants' Views on Current Conditions and the Economic Outlook
In conjunction with this FOMC meeting, participants submitted their projections of the most likely outcomes for real GDP growth, the unemployment rate, and inflation for each year from 2025 through 2028 and over the longer run. The projections were based on participants' individual assessments of appropriate monetary policy, including their projections of the federal funds rate. Participants also provided their individual assessments of the level of uncertainty and the balance of risks associated with their projections. The Summary of Economic Projections was released to the public after the meeting.
Participants observed that inflation had moved up since the beginning of the year and remained somewhat above the Committee's 2 percent longer-run goal. Although participants generally assessed that this year's tariff increases had put upward pressure on inflation, some remarked that these effects appeared to have been somewhat muted to date relative to expectations from earlier in the year. A few participants suggested that productivity gains may be reducing inflation pressures. A couple of participants expressed the view that, excluding the effects of this year's tariff increases, inflation would be close to target. A few other participants, however, emphasized that progress of inflation toward the Committee's 2 percent objective had stalled, even excluding the effects of this year's tariff increases.
With regard to the outlook for inflation, participants generally expected that, given appropriate monetary policy, inflation would be somewhat elevated in the near term and would gradually return to 2 percent thereafter. Some participants noted that business contacts had indicated that they would raise prices over time because of higher input costs stemming from tariff increases. Uncertainty remained about the inflation effects of this year's increase in tariffs, though most participants expected these effects to be realized by the end of next year. Some participants remarked that the labor market was not expected to be a source of inflationary pressure. A couple of participants expected that the reduction in net migration would be associated with lower demand and lower inflation, and a couple of participants observed that continued productivity gains would likely reduce inflation pressures. Participants noted that longer-term inflation expectations continued to be well anchored and that it was important they remain so to help return inflation to 2 percent. Various participants stressed the central role of monetary policy in ensuring that longer-term inflation expectations remained well anchored. A majority of participants emphasized upside risks to their outlooks for inflation, pointing to inflation readings moving further from 2 percent, continued uncertainty about the effects of tariffs, the possibility that elevated inflation proves to be more persistent than currently expected even after the inflation effects of this year's tariff increases fade, or the possibility of longer-term inflation expectations moving up after a long period of elevated inflation readings. Some participants remarked that they perceived less upside risk to their outlooks for inflation than earlier in the year.
In their discussion of the labor market, participants observed that job gains had slowed and the unemployment rate had edged up. Participants noted that the low level of estimated job gains over recent months likely reflected declines in growth of both labor supply and labor demand. Participants noted low net immigration or changes in labor force participation as factors reducing labor supply. As for factors that may be reducing labor demand, participants noted moderate economic growth or the effects of high uncertainty on firms' hiring decisions. Under these circumstances, participants cited a number of other indicators as helpful for assessing labor market conditions. These included the unemployment rate, the ratio of job vacancies to unemployed workers, wage growth, the percentage of unemployed workers who find a job, the quits rate among employed workers, and the layoff rate. Participants generally assessed that recent readings of these indicators did not show a sharp deterioration in labor market conditions. A few participants, though, saw recently released labor market data, including revisions to previously released data and the BLS's preliminary estimate of the payroll employment benchmark revision, as indicating that labor market conditions had been softening for longer than was previously reported.
With regard to the outlook for the labor market, participants generally expected that, under appropriate monetary policy, labor market conditions would be little changed or would soften modestly. Several participants noted that the number of monthly job gains consistent with a stable unemployment rate had declined over the past year and would likely remain low, citing the large number of workers nearing retirement age or continued low net immigration. Participants indicated that their outlooks for the labor market were uncertain and viewed downside risks to employment as having increased over the intermeeting period. In support of this view, participants mentioned a number of indicators, including the following: low hiring and firing rates, which are evidence of less dynamism in the labor market; concentrated job gains in a small number of sectors; and increases in unemployment rates for groups that have historically shown greater sensitivity to cyclical changes in economic activity, such as those for African Americans and young people. Several participants saw continuing adoption of artificial intelligence as potentially reducing labor demand. Some participants noted that survey responses indicated that household sentiment regarding the labor market had moved down.
Participants observed that growth of economic activity slowed in the first half of the year relative to last year. Regarding the household sector, participants noted that lower consumption growth had contributed to the slowdown in the growth of economic activity in the first half of the year. Several participants remarked that recent data indicated some firming of consumption expenditures this quarter. Some participants mentioned that households were showing greater price sensitivity, and several participants observed that high-income households were increasingly doing better, economically, than lower-income households. Several participants noted continued weakness in the housing market, and a couple of participants mentioned the possibility of a more substantial deterioration in the housing market as a downside risk to economic activity. For businesses, many participants noted strong high-tech investment. Several participants noted that financial conditions were supportive of economic activity. A few participants commented that the agricultural sector continued to face headwinds because of low crop prices and high input costs.
In their consideration of monetary policy at this meeting, participants noted that inflation had risen recently and remained somewhat elevated, and that recent indicators suggested that growth of economic activity had moderated in the first half of the year. While participants noted the unemployment rate remained low, they observed that it had edged up and job gains had slowed. In addition, they judged that downside risks to employment had risen. Against this backdrop, almost all participants supported reducing the target range for the federal funds rate 1/4 percentage point at this meeting. Participants generally noted that their judgments about this meeting's appropriate policy action reflected a shift in the balance of risks. In particular, most participants observed that it was appropriate to move the target range for the federal funds rate toward a more neutral setting because they judged that downside risks to employment had increased over the intermeeting period and that upside risks to inflation had either diminished or not increased. A few participants stated there was merit in keeping the federal funds rate unchanged at this meeting or that they could have supported such a decision. These participants noted that progress toward the Committee's 2 percent inflation objective had stalled this year as inflation readings increased and expressed concern that longer-term inflation expectations may rise if inflation does not return to its objective in a timely manner. One participant agreed with the need to move policy toward a more neutral stance but preferred a 1/2 percentage point reduction at this meeting. All participants judged it appropriate to continue the process of reducing the Federal Reserve's securities holdings.
In considering the outlook for monetary policy, almost all participants noted that, with the reduction in the target range for the federal funds rate at this meeting, the Committee was well positioned to respond in a timely way to potential economic developments. Participants observed that monetary policy was not on a preset course and would be informed by a wide range of incoming data, the evolving economic outlook, and the balance of risks. Participants expressed a range of views about the degree to which the current stance of monetary policy was restrictive and about the likely future path of policy. Most judged that it likely would be appropriate to ease policy further over the remainder of this year. Some participants noted that, by several measures, financial conditions suggested that monetary policy may not be particularly restrictive, which they judged as warranting a cautious approach in the consideration of future policy changes.
In discussing risk-management considerations that could bear on the outlook for monetary policy, participants generally judged that upside risks to inflation remained elevated and that downside risks to employment were elevated and had increased. Participants noted that, in these circumstances, if policy were eased too much or too soon and inflation continued to be elevated, then longer-term inflation expectations could become unanchored and make restoring price stability even more challenging. By contrast, if policy rates were kept too high for too long, then unemployment could rise unnecessarily, and the economy could slow sharply. Against this backdrop, participants stressed the importance of taking a balanced approach in promoting the Committee's employment and inflation goals, taking into account the extent of departures from those goals and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with the Committee's mandate.
Several participants remarked on issues related to the Federal Reserve's balance sheet and implementation of monetary policy. A few participants stated that balance sheet reduction had proceeded smoothly thus far and that various indicators pointed to reserves remaining abundant. Nevertheless, with reserves declining and expected to decline further, they noted that it was important to continue to monitor money market conditions closely and evaluate how close reserves were to their ample level. In that context, a few participants noted that the SRF would help keep the federal funds rate within its target range and ensure that temporary pressures in money markets would not disrupt the ongoing reduction in Federal Reserve securities holdings to the level needed to implement monetary policy efficiently and effectively in the Committee's ample-reserves regime.
Committee Policy Actions
In their discussions of monetary policy for this meeting, members agreed that recent indicators suggested that growth of economic activity had moderated in the first half of the year. To reflect developments in the labor market, they agreed to no longer characterize labor market conditions as solid and instead state that job gains had slowed and that the unemployment rate had edged up but remained low. Members concurred that inflation remained somewhat elevated and agreed to add that inflation had moved up. They agreed that the Committee was attentive to the risks to both sides of its dual mandate and to add that downside risks to employment had risen to reflect their concerns about the labor market.
In support of the Committee's goals and in light of the shift in the balance of risks, almost all members agreed to lower the target range for the federal funds rate 1/4 percentage point to 4 to 4-1/4 percent. One member voted against that decision, preferring to lower the target range 1/2 percentage point at this meeting. Members agreed that, in considering additional adjustments to the target range for the federal funds rate, the Committee would carefully assess incoming data, the evolving outlook, and the balance of risks. All members agreed that the postmeeting statement should affirm their strong commitment both to supporting maximum employment and to returning inflation to the Committee's 2 percent objective.
Members agreed that, in assessing the appropriate stance of monetary policy, the Committee would continue to monitor the implications of incoming information for the economic outlook. They would be prepared to adjust the stance of monetary policy as appropriate if risks emerged that could impede the attainment of the Committee's goals. Members also agreed that their assessments would take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
At the conclusion of the discussion, the Committee voted to direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.:
"Effective September 18, 2025, the Federal Open Market Committee directs the Desk to:
Undertake open market operations as necessary to maintain the federal funds rate in a target range of 4 to 4-1/4 percent.
Conduct standing overnight repurchase agreement operations with a minimum bid rate of 4.25 percent and with an aggregate operation limit of $500 billion.
Conduct standing overnight reverse repurchase agreement operations at an offering rate of 4 percent and with a per-counterparty limit of $160 billion per day.
Roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing in each calendar month that exceeds a cap of $5 billion per month. Redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap.
Reinvest the amount of principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities (MBS) received in each calendar month that exceeds a cap of $35 billion per month into Treasury securities to roughly match the maturity composition of Treasury securities outstanding.
Allow modest deviations from stated amounts for reinvestments, if needed for operational reasons."
The vote also encompassed approval of the statement below for release at 2:00 p.m.:
"Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen.
In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4 to 4-1/4 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments."
Voting for this action: Jerome H. Powell, John C. Williams, Michael S. Barr, Michelle W. Bowman, Susan M. Collins, Lisa D. Cook, Austan D. Goolsbee, Philip N. Jefferson, Alberto G. Musalem, Jeffrey R. Schmid, and Christopher J. Waller.
Voting against this action: Stephen I. Miran.
Governor Miran preferred to lower the target range for the federal funds rate by 1/2 percentage point at this meeting in light of further softening in the labor market over the first half of the year and underlying inflation that in his view was meaningfully closer to 2 percent than was apparent in the data. Governor Miran also expressed the view that additional policy easing was also appropriate to reflect that the neutral rate of interest had fallen due to factors such as increased tariff revenues that had raised net national savings and changes in immigration policy that had reduced population growth.
Consistent with the Committee's decision to lower the target range for the federal funds rate to 4 to 4-1/4 percent, the Board of Governors of the Federal Reserve System voted to lower the interest rate paid on reserve balances to 4.15 percent, effective September 18, 2025. The Board of Governors of the Federal Reserve System voted to approve a 1/4 percentage point decrease in the primary credit rate to 4.25 percent, effective September 18, 2025.2
It was agreed that the next meeting of the Committee would be held on TuesdayâWednesday, October 28â29, 2025. The meeting adjourned at 10:10 a.m. on September 17, 2025.
Notation Vote
By notation vote completed on August 19,â¯2025, the Committee unanimously approved the minutes of the Committee meeting held on July 29â30,â¯2025.
Attendance
Jerome H. Powell, Chair
John C. Williams, Vice Chair
Michael S. Barr
Michelle W. Bowman
Susan M. Collins
Lisa D. Cook
Austan D. Goolsbee
Philip N. Jefferson
Stephen I. Miran
Alberto G. Musalem
Jeffrey R. Schmid
Christopher J. Waller
Beth M. Hammack, Neel Kashkari, Lorie K. Logan, Anna Paulson, and Sushmita Shukla, Alternate Members of the Committee
Thomas I. Barkin, Raphael W. Bostic, and Mary C. Daly, Presidents of the Federal Reserve Banks of Richmond, Atlanta, and San Francisco, respectively
Joshua Gallin, Secretary
Matthew M. Luecke, Deputy Secretary
Brian J. Bonis, Assistant Secretary
Michelle A. Smith, Assistant Secretary
Mark E. Van Der Weide, General Counsel
Richard Ostrander, Deputy General Counsel
Trevor A. Reeve, Economist
Stacey Tevlin, Economist
Beth Anne Wilson, Economist
Shaghil Ahmed and William Wascher, Associate Economists
Roberto Perli, Manager, System Open Market Account
Julie Ann Remache, Deputy Manager, System Open Market Account
Daniel Aaronson, Interim Director of Research, Federal Reserve Bank of Chicago
Jose Acosta, Senior System Engineer II, Division of Information Technology, Board
Mary L. Aiken, Acting Director, Division of Supervision and Regulation, Board
Oladoyin Ajifowoke, Program Management Analyst, Division of Monetary Affairs, Board
Roc Armenter, Executive Vice President, Federal Reserve Bank of Philadelphia
Alyssa Arute,3 Assistant Director, Division of Reserve Bank Operations and Payment Systems, Board
Alessandro Barbarino, Special Adviser to the Board, Division of Board Members, Board
William F. Bassett, Senior Associate Director, Division of Financial Stability, Board
Erik Bostrom, Senior Financial Institution Policy Analyst I, Division of Monetary Affairs, Board
Ellen J. Bromagen, First Vice President, Federal Reserve Bank of Chicago
Brent Bundick, Vice President, Federal Reserve Bank of Kansas City
Michele Cavallo, Special Adviser to the Board, Division of Board Members, Board
Lisa M. Chung,3 Capital Markets Trading Director, Federal Reserve Bank of New York
Juan Carlos Climent, Special Adviser to the Board, Division of Board Members, Board
Daniel M. Covitz, Deputy Director, Division of Research and Statistics, Board
Stephanie E. Curcuru, Deputy Director, Division of International Finance, Board
Andrea De Michelis, Deputy Associate Director, Division of International Finance, Board
Marnie Gillis DeBoer, Senior Associate Director, Division of Monetary Affairs, Board
Anthony M. Diercks, Principal Economist, Division of Monetary Affairs, Board
Laura J. Feiveson, Special Adviser to the Board, Division of Board Members, Board
Glenn Follette, Associate Director, Division of Research and Statistics, Board
Brian Gowen,3 Capital Markets Trading Principal, Federal Reserve Bank of New York
Christopher J. Gust, Associate Director, Division of Monetary Affairs, Board
Valerie S. Hinojosa, Section Chief, Division of Monetary Affairs, Board
Colin J. Hottman, Principal Economist, Division of International Finance, Board
Matteo Iacoviello, Senior Associate Director, Division of International Finance, Board
Jane E. Ihrig, Special Adviser to the Board, Division of Board Members, Board
Benjamin K. Johannsen, Assistant Director, Division of Monetary Affairs, Board
Michael T. Kiley, Deputy Director, Division of Monetary Affairs, Board
Elizabeth Klee, Deputy Director, Division of Monetary Affairs, Board
Edward S. Knotek II, Senior Vice President, Federal Reserve Bank of Cleveland
Anna R. Kovner, Executive Vice President, Federal Reserve Bank of Richmond
Andreas Lehnert, Director, Division of Financial Stability, Board
Paul Lengermann, Deputy Associate Director, Division of Research and Statistics, Board
Kurt F. Lewis, Special Adviser to the Chair, Division of Board Members, Board
Laura Lipscomb, Special Adviser to the Board, Division of Board Members, Board
David López-Salido,4 Senior Associate Director, Division of Monetary Affairs, Board
Byron Lutz, Deputy Associate Director, Division of Research and Statistics, Board
Fernando M. Martin, Senior Economic Policy Advisor II, Federal Reserve Bank of St. Louis
Benjamin W. McDonough, Deputy Secretary and Ombudsman, Office of the Secretary, Board
Brent H. Meyer, Assistant Vice President, Federal Reserve Bank of Atlanta
Norman J. Morin, Associate Director, Division of Research and Statistics, Board
Anna Nordstrom, Head of Markets, Federal Reserve Bank of New York
Nicolas Petrosky-Nadeau, Vice President, Federal Reserve Bank of San Francisco
Caterina Petrucco-Littleton, Deputy Associate Director, Division of Consumer and Community Affairs, Board; Special Adviser to the Board, Division of Board Members, Board
Eugenio P. Pinto, Special Adviser to the Board, Division of Board Members, Board
Odelle Quisumbing,3 Assistant to the Secretary, Office of the Secretary, Board
Andrea Raffo, Senior Vice President, Federal Reserve Bank of Minneapolis
Jeanne Rentezelas, First Vice President, Federal Reserve Bank of Philadelphia
Argia Sbordone, Research Department Head, Federal Reserve Bank of New York
Kirk Schwarzbach, Special Assistant to the Board, Division of Board Members, Board
Zeynep Senyuz, Special Adviser to the Board, Division of Board Members, Board
John J. Stevens, Senior Associate Director, Division of Research and Statistics, Board
Jenny Tang, Vice President, Federal Reserve Bank of Boston
Manjola Tase, Principal Economist, Division of Monetary Affairs, Board
Mary H. Tian, Group Manager, Division of Monetary Affairs, Board
Annette Vissing-Jørgensen, Senior Adviser, Division of Monetary Affairs, Board
Jeffrey D. Walker,3 Senior Associate Director, Division of Reserve Bank Operations and Payment Systems, Board
Rebecca Zarutskie, Senior Vice President, Federal Reserve Bank of Dallas
Andrei Zlate, Group Manager, Division of Monetary Affairs, Board
_______________________
Joshua Gallin
Secretary
1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes; the Board of Governors of the Federal Reserve System is referenced as the "Board" in these minutes. Return to text
2. In taking this action, the Board approved requests to establish that rate submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco. The vote also encompassed approval by the Board of Governors of the establishment of a 4.25 percent primary credit rate by the remaining Federal Reserve Banks, effective on September 18, 2025, or the date such Reserve Banks inform the Secretary of the Board of such a request. (Secretary's note: Subsequently, the Federal Reserve Banks of Cleveland and St. Louis were informed of the Board's approval of their establishment of a primary credit rate of 4.25 percent, effective September 18, 2025.) Return to text
3. Attended through the discussion of developments in financial markets and open market operations. Return to text
4. Attended opening remarks for Tuesday session only. Return to text
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2025-07-30
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2025-07-30
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Statement
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Although swings in net exports continue to affect the data, recent indicators suggest that growth of economic activity moderated in the first half of the year. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate.
In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgageâbacked securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Susan M. Collins; Lisa D. Cook; Austan D. Goolsbee; Philip N. Jefferson; Alberto G. Musalem; and Jeffrey R. Schmid. Voting against this action were Michelle W. Bowman and Christopher J. Waller, who preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting. Absent and not voting was Adriana D. Kugler.
For media inquiries, please email [email protected] or call 202-452-2955.
Implementation Note issued July 30, 2025
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2025-07-30
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2025-08-20
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Minute
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Minutes of the Federal Open Market Committee
July 29â30, 2025
A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors on Tuesday, July 29, 2025, at 9:00 a.m. and continued on Wednesday, July 30, 2025, at 9:00 a.m.1
Review of Monetary Policy Strategy, Tools, and Communications
Participants continued their discussion related to the ongoing review of the Federal Reserve's monetary policy strategy, tools, and communication practices (framework review). They observed that they had made important progress toward revising the Committee's Statement on Longer-Run Goals and Monetary Policy Strategy (consensus statement). Participants discussed potential revisions to the consensus statement that would incorporate lessons learned from economic developments since the 2020 framework review and would be designed to be robust across a wide range of economic conditions. Participants noted that the Committee was close to finalizing changes to the consensus statement and would do so in the near future.
Developments in Financial Markets and Open Market Operations
The manager turned first to a review of financial market developments. Over the intermeeting period, the expected path of the policy rate and longer-term Treasury yields were little changed, equity prices increased, credit spreads narrowed, and the dollar depreciated slightly. The manager noted that markets continued to be attentive to news related to trade policy, though markets' reaction to incoming information on this topic was more restrained than in April and May. Against this backdrop, the manager reported that the Open Market Desk's Survey of Market Expectations (Desk survey) indicated that the median respondent's expectations regarding both real gross domestic product (GDP) growth and inflation were roughly unchanged.
The manager turned next to policy rate expectations, which held steady over the intermeeting period, consistent with a relatively stable macroeconomic outlook. The median modal path of the federal funds rate, as given in the Desk survey, was unchanged from the corresponding path in the June survey and continued to indicate expectations of two 25 basis point rate cuts in the second half of this year. Market-based measures of policy rate expectations were also little changed and indicated expectations of one to two 25 basis point rate cuts by the end of the year.
The manager then discussed developments in Treasury securities markets and market-based measures of inflation compensation. Nominal Treasury yields were little changed, on net, over the intermeeting period, consistent with the lack of appreciable changes in the macroeconomic outlook and in policy rate expectations. Perceived risks associated with trade policy developments contributed to an increase in near-term market measures of inflation compensation, while longer-horizon measures of inflation compensation rose more modestly.
The manager then turned to market pricing of risky assets. The increases in equity prices and narrowing of credit spreads suggested that markets assessed that the overall U.S. economy was remaining resilient; still, financial markets appeared to be making distinctions between individual corporations on the basis of the size and quality of their earnings. Valuations of the S&P 500 index continued to move above long-run average levels, mostly driven by optimism about the largest technology firms' scope to benefit from the further adoption of artificial intelligence (AI). However, valuations of an index of smaller-capitalization firms, although higher over the intermeeting period, remained below their historical averages.
Regarding foreign exchange developments, the manager noted that the broad trade-weighted dollar index had continued to depreciate since the previous FOMC meeting but at a slower pace than in recent intermeeting periods. At the same time, the manager noted that correlations between the dollar and its fundamental drivers had normalized recently. The available data continued to suggest relative stability in foreign holdings of U.S. assets.
The manager turned next to money markets. Unsecured overnight rates remained stable over the intermeeting period. Rates on Treasury repurchase agreements (repo) were somewhat higher than the low levels seen in the previous intermeeting period. The manager observed that two factors contributed to this slight increase: the normal upward pressure on money market rates associated with the June quarter-end; and the rise in net Treasury bill issuance amid the rebuilding of the Treasury General Account (TGA) balance following the increase in the debt limit in early July. On June 30, as market rates climbed modestly above the standing repo facility's (SRF) minimum bid rate at quarter-end, there was material usage of the facility, with counterparties borrowing a bit more than $11 billion, the highest utilization to date.
The manager also discussed the projected trajectory of various Federal Reserve liabilities. With increased Treasury bill issuance associated with the rebuilding of the TGA balance likely to result in a rise in money market rates, take-up at the overnight reverse repurchase agreement (ON RRP) facility was expected to decline to low levels relatively soon. Market indicators continued to suggest that reserves remained abundant; however, ongoing System Open Market Account (SOMA) portfolio runoff, a substantial expected increase in the TGA balance, and the depletion of the ON RRP facility were together likely to bring about a sustained decline in reserves for the first time since portfolio runoff started in June 2022. Against this backdrop, the staff would continue to monitor indicators of reserve conditions closely. The manager also noted that there would be timesâsuch as quarter-ends, tax dates, and days associated with large settlements of Treasury securitiesâwhen reserves were likely to dip temporarily to even lower levels. At those times, utilization of the SRF would likely support the smooth functioning of money markets and the implementation of monetary policy.
By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System's account during the intermeeting period.
Staff Review of the Economic Situation
The information available at the time of the meeting indicated that real GDP expanded at a tepid pace in the first half of the year. The unemployment rate continued to be low, and consumer price inflation remained somewhat elevated.
Disinflation appeared to have stalled, with tariffs putting upward pressure on goods price inflation. Total consumer price inflationâas measured by the 12-month change in the price index for personal consumption expenditures (PCE)âwas estimated to have been 2.5 percent in June, based on the consumer and producer price indexes. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, was estimated to have been 2.7 percent in June. Both inflation rates were similar to their year-earlier levels.
Recent data indicated that labor market conditions remained solid. The unemployment rate was 4.1 percent in June, down 0.1 percentage point from May. The participation rate edged down 0.1 percentage point in June, and the employment-to-population ratio was unchanged. Total nonfarm payroll gains were solid in June, though the pace of private payroll gains stepped down noticeably. The ratio of job vacancies to unemployed workers was 1.1 in June and remained within the narrow range seen over the past year. Average hourly earnings for all employees rose 3.7 percent over the 12 months ending in June, slightly lower than the year-earlier pace.
According to the advance estimate, real GDP rose in the second quarter after declining in the first quarter. Growth of real private domestic final purchasesâwhich comprises PCE and private fixed investment and which often provides a better signal than GDP of underlying economic momentumâslowed in the second quarter, as a step-down in investment growth offset faster PCE growth.
After exerting a substantial negative drag on GDP growth in the first quarter, net exports made a large positive contribution in the second quarter. Real imports of goods and services declined sharply, likely reflecting the aftereffects of the substantial front-loading of imports recorded in the first quarter ahead of anticipated tariff hikes. By contrast, exports of goods declined at a more moderate pace, and exports of services rose further.
Abroad, activity indicators pointed to a slowdown of foreign economic growth in the second quarter, as the transitory boost due to the front-loading of U.S. imports earlier in the year faded. Of note, monthly GDP data through May indicated that economic activity contracted in Canada. China's GDP, however, continued to expand at a moderate pace in the second quarter, supported by solid domestic spending.
Headline inflation rates were near targets in most foreign economies, held down by past declines in oil prices and fading wage pressures following a tightening in monetary policy stances over the past few years. However, core inflation remained somewhat elevated in some foreign economies.
Over the intermeeting period, several foreign central banks, such as the Bank of Mexico and the Swiss National Bank, further eased their monetary policy stance, while others, such as the Bank of England and the European Central Bank, held their policy rates steady. In their communications, foreign central banks continued to emphasize that U.S. trade policies and accompanying uncertainty have started to weigh on economic activity in their economies.
Staff Review of the Financial Situation
Over the intermeeting period, both the market-implied expected path of the federal funds rate over the next year and nominal Treasury yields were little changed, on net, while real yields declined. Inflation compensation rose across the maturity spectrumâparticularly at shorter horizonsâreflecting, at least in part, perceived risks associated with trade policy developments.
Broad equity price indexes increased and credit spreads tightened, consistent with improving risk sentiment attributed in part to easing geopolitical tensions as well as stronger-than-expected economic activity. Credit spreads for all rating categories except the lowest-quality bonds narrowed to exceptionally low levels relative to their historical distribution. The VIXâa forward-looking measure of near-term equity market volatilityâdeclined moderately to just below the median of its historical distribution.
Over the intermeeting period, news about trade policy interpreted as positive by investors together with some easing of geopolitical tensions in the Middle East led to moderate increases in foreign equity prices and longer-term yields. The broad dollar index was little changed on net.
Conditions in U.S. short-term funding markets remained orderly over the intermeeting period while displaying typical quarter-end dynamics. The One Big Beautiful Bill Act, which became law on July 4, ended the previous debt issuance suspension period, after which the TGA balance increased from $313 billion on July 3 to an expected $500 billion by the end of July. Rates in secured markets were, on average, somewhat elevated relative to the average over the previous intermeeting period, owing in part to quarter-end effects. Although upward pressure on repo rates was modest at quarter-end, take-up at the SRF was $11.1 billion on June 30âits highest level since the inception of the facilityâas the addition of an early settlement option seemed to encourage participation. Average usage of the ON RRP facility was little changed over the intermeeting period.
In domestic credit markets, borrowing costs facing businesses, households, and municipalities eased moderately but remained elevated relative to post-Global Financial Crisis (GFC) average levels. Yields on both corporate bonds and leveraged loans declined modestly, while interest rates on small business loans were little changed on net. Rates on 30-year fixed-rate conforming residential mortgages were little changed and remained near the top of the post-GFC historical distribution. Interest rates on new auto loans and for new credit card offers have fluctuated in a narrow range in recent months around the upper end of their post-GFC distributions.
Credit remained generally available. Financing through capital markets and nonbank lenders was readily accessible for public corporations as well as large and middle-market private corporations. Issuance of nonfinancial corporate bonds and leveraged loans was solid in June, and private credit continued to be broadly available despite ebbing somewhat in May and June. Loan balances on banks' books increased at a moderate pace in the second quarter, led by growth in commercial and industrial (C&I) loans. Lending to small businesses remained subdued, an outcome attributed to weak borrower demand.
Banks in the July Senior Loan Officer Opinion Survey on Bank Lending Practices reported that, on net, underwriting standards were little changed in the second quarter across most loan categories, although the level of standards remained on the tighter end of their historical range. C&I loan standards, however, were reported to be a little easier than the range seen since 2005, yet still somewhat tighter than in periods not associated with financial stress. Consumer credit continued to be readily available for high-credit-score borrowers, though growth in applications for home purchases, refinances, auto loans, and revolving credit was relatively weak, reflecting heightened borrowing costs and tighter credit standards for lower-credit-score borrowers.
In the second quarter, credit performance was generally stable but somewhat weaker than pre-pandemic levels. Corporate bond and leveraged loan credit performance declined moderately in May and June, though defaults remained below post-GFC medians through June. In the commercial real estate market, delinquency rates on commercial mortgage-backed securities remained elevated through June. The rate of serious delinquencies on Federal Housing Administration mortgages continued to be elevated. By contrast, delinquency rates on most other mortgage loan types continued to stay near historical lows. In May, the credit card delinquency rate was a little below its year-earlier value, while that for auto loans was roughly the same as in May last year; both were elevated relative to their pre-pandemic levels. Student loan delinquencies reported to credit bureaus shot up in the first quarter of the year after the expiration of the on-ramp period for student loan payments.
The staff provided an updated assessment of the stability of the U.S. financial system and, on balance, continued to characterize the system's financial vulnerabilities as notable. The staff judged that asset valuation pressures were elevated. In equity markets, price-to-earnings ratios stood at the upper end of their historical distribution, while spreads on high-yield corporate bonds narrowed notably and were low relative to their historical distribution. Housing valuations edged down but remained elevated.
Vulnerabilities associated with nonfinancial business and household debt were characterized as moderate. Household debt to GDP was at its lowest level in the past 20 years, and household balance sheets remained strong. The ability of publicly traded firms to service their debt remained solid. For private firms, debt grew at a rapid pace, while these firms' interest coverage ratios declined to the lower range of their historical distributions, suggesting that vulnerabilities may be growing in that sector.
Vulnerabilities associated with leverage in the financial sector were characterized as notable. Regulatory capital ratios in the banking sector remained high, while recent annual supervisory stress-test results showed that all participants stayed above minimum capital requirements even under stress conditions. Banks, however, were still seen as more exposed to interest rate risk than had been historically typical, albeit to a lesser degree than was the case earlier in the decade. In the nonbank sector, life insurers' allocation of assets toward private credit and risky assets, funded in part by nontraditional liabilities with short maturities, continued to grow. Leverage and rollover risk at hedge funds remained high and concentrated in the largest firms.
Vulnerabilities associated with funding risks were characterized as moderate. Money market funds (MMFs) continued to be vulnerable to runs, though the aggregate assets of such prime and prime-like investment vehicles remained in the middle of their historical range as a fraction of GDP. Prime-like alternativesâincluding private liquidity funds, offshore MMFs, and stablecoinsâhave grown rapidly and were noted as relatively less transparent.
Staff Economic Outlook
The staff's real GDP growth projection for this year through 2027 was similar to the one prepared for the June meeting, reflecting the offsetting effects of several revisions to the outlook. The staff expected that the rise in the cost of imported goods inclusive of tariffs would be smaller and occur later than in their previous forecast; in addition, financial conditions were projected to be slightly more supportive of output growth. However, these positive influences on the outlook were offset by weaker-than-expected spending data and a smaller assumed population boost from net immigration. The staff continued to expect that the labor market would weaken, with the unemployment rate projected to move above the staff's estimate of its natural rate around the end of this year and to remain above the natural rate through 2027.
The staff's inflation projection was slightly lower than the one prepared for the June meeting, reflecting the downward revision to the assumed effects of tariffs on imported goods prices. Tariffs were expected to raise inflation this year and to provide some further upward pressure on inflation in 2026; inflation was then projected to decline to 2 percent by 2027.
The staff continued to view the uncertainty around the projection as elevated, primarily reflecting uncertainty regarding changes to economic policies, including trade policy, and their associated economic effects. Risks to real activity were judged to remain skewed to the downside in light of the weakening in GDP growth seen so far this year and elevated policy uncertainty. The staff continued to view the risks around the inflation forecast as skewed to the upside, as the projected rise in inflation this year could prove to be more persistent than assumed in the baseline projection.
Participants' Views on Current Conditions and the Economic Outlook
In their discussion of inflation, many participants observed that overall inflation remained somewhat above the Committee's 2 percent longer-run goal. Participants noted that tariff effects were becoming more apparent in the data, as indicated by recent increases in goods price inflation, while services price inflation had continued to slow. A couple of participants suggested that tariff effects were masking the underlying trend of inflation and, setting aside the tariff effects, inflation was close to target.
With regard to the outlook for inflation, participants generally expected inflation to increase in the near term. Participants judged that considerable uncertainty remained about the timing, magnitude, and persistence of the effects of this year's increase in tariffs. In terms of timing, many participants noted that it could take some time for the full effects of higher tariffs to be felt in consumer goods and services prices. Participants cited several contributors to this likely lag. These included the stockpiling of inventories in anticipation of higher tariffs; slow pass-through of input cost increases into final goods and services prices; gradual updating of contract prices; maintenance of firmâcustomer relationships; issues related to tariff collection; and still-ongoing trade negotiations. As for the magnitude of tariff effects on prices, a few participants observed that evidence so far suggested that foreign exporters were paying at most a modest part of the increased tariffs, implying that domestic businesses and consumers were predominantly bearing the tariff costs. Several participants, drawing on information provided by business contacts or business surveys, expected that many companies would increasingly have to pass through tariff costs to end-customers over time. However, a few participants reported that business contacts and survey respondents described a mix of strategies as being undertaken to avoid fully passing on tariff costs to customers. Such strategies included negotiating with or switching suppliers, changing production processes, lowering profit margins, exerting more wage discipline, or exploiting cost-saving efficiency measures such as automation and new technologies. A few participants stressed that current demand conditions were limiting firms' ability to pass tariff costs into prices. Regarding inflation persistence, a few participants emphasized that they expected higher tariffs to lead only to a one-time increase in the price level that would be realized over a reasonably contained period. A few participants remarked that tariff-related factors, including supply chain disruptions, could lead to stubbornly elevated inflation and that it may be difficult to disentangle tariff-related price increases from changes in underlying trend inflation.
Participants noted that longer-term inflation expectations continued to be well anchored and that it was important that they remain so. Several participants emphasized that inflation had exceeded 2 percent for an extended period and that this experience increased the risk of longer-term inflation expectations becoming unanchored in the event of drawn-out effects of higher tariffs on inflation. A couple of participants noted that inflation expectations would likely be influenced by the behavior of the overall inflation rate, inclusive of the effects of tariffs. Various participants emphasized the central role of monetary policy in ensuring that tariff effects did not lead to persistently higher expected and realized inflation.
In their discussion of the labor market, participants observed that the unemployment rate remained low and that employment was at or near estimates of maximum employment. Several participants noted that the low and stable unemployment rate reflected a combination of low hiring and low layoffs. Some participants observed that their contacts and business survey respondents had reported being reluctant to hire or fire amid elevated uncertainty. Regarding the outlook for the labor market, some participants mentioned indicators that could suggest a softening in labor demand. These included slower and more concentrated job growth, an increase in cyclically sensitive Black and youth unemployment rates, and lower wage increases of job switchers than job stayers. Some of these participants also noted anecdotes in the Beige Book or in their discussions with contacts that pointed to slower demand. Furthermore, a number of participants noted that softness in aggregate demand and economic activity may translate into weaker labor market conditions, as could a potential inability of some importers to withstand higher tariffs. Some participants remarked, however, that slower output or employment growth was not necessarily indicative of emerging economic slack because a decline in immigration was lowering both actual and potential output growth as well as reducing both actual payroll growth and the number of new jobs needed to keep the unemployment rate stable. A few participants relayed reports received from contacts that immigration policies were affecting labor supply in some sectors, including construction and agriculture.
Participants observed that growth of economic activity slowed in the first half of the year, driven in large part by slower consumption growth and a decline in residential investment. Several participants stated that they expected growth in economic activity to remain low in the second half of this year. Some participants noted that economic activity would nevertheless be supported by financial conditions, including elevated household net worth, and a couple of participants highlighted stable or low credit card delinquencies. A couple of participants remarked that economic activity would be supported by the resolution of policy uncertainty over time. Regarding the household sector, several participants observed that slower real income growth may be weighing on growth in consumer spending. A few participants noted a weakening in housing demand, with increased availability of homes for sale and falling house prices. As for businesses, several participants remarked that ongoing policy uncertainty had continued to slow business investment, but several observed that business sentiment had improved in recent months. A few participants commented that the agricultural sector faced headwinds due to low crop prices.
In their evaluation of the risks and uncertainties associated with the economic outlook, participants judged that uncertainty about the economic outlook remained elevated, though several participants remarked that there had been some reduction in uncertainty regarding fiscal policy, immigration policy, or tariff policy. Participants generally pointed to risks to both sides of the Committee's dual mandate, emphasizing upside risk to inflation and downside risk to employment. A majority of participants judged the upside risk to inflation as the greater of these two risks, while several participants viewed the two risks as roughly balanced, and a couple of participants considered downside risk to employment the more salient risk. Regarding upside risks to inflation, participants pointed to the uncertain effects of tariffs and the possibility of inflation expectations becoming unanchored. In addition to tariff-induced risks, potential downside risks to employment mentioned by participants included a possible tightening of financial conditions due to a rise in risk premiums, a more substantial deterioration in the housing market, and the risk that the increased use of AI in the workplace may lower employment.
In their discussion of financial stability, participants who commented noted vulnerabilities to the financial system that they assessed warranted monitoring. Several participants noted concerns about elevated asset valuation pressures. Regarding banks, a couple of participants commented that, though regulatory capital levels remained strong, some banks continued to be vulnerable to a rise in longer-term yields and the associated unrealized losses on bank assets. A few participants commented on vulnerabilities in the market for Treasury securities, raising concerns about dealer intermediation capacity, the increasing presence of hedge funds in the market, and the fragility associated with low market depth. A couple of participants discussed foreign exchange swaps, noting that these served as key sources of dollar funding for foreign financial institutions that lend dollars to their customers in the U.S. and abroad, but also that they entailed vulnerabilities due to maturity mismatch and rollover risk. Many participants discussed recent and prospective developments related to payment stablecoins and possible implications for the financial system. These participants noted that use of payment stablecoins might grow following the recent passage of the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act). They remarked that payment stablecoins could help improve the efficiency of the payment system. They also observed that such stablecoins could increase the demand for the assets needed to back them, including Treasury securities. In addition, participants who commented raised concerns that stablecoins could have broader implications for the banking and financial systems as well as monetary policy implementation, and thus warranted close attention, including monitoring of the various assets used to back stablecoins.
In their consideration of monetary policy at this meeting, participants noted that inflation remained somewhat elevated. Participants also observed that recent indicators suggested that the growth of economic activity had moderated in the first half of the year, although swings in net exports and inventories had affected the measurement and interpretation of the data. Participants further noted that the unemployment rate remained at a low level and that the labor market was at or near maximum employment. Participants judged that uncertainty about the economic outlook remained elevated. Almost all participants viewed it as appropriate to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent at this meeting. All participants judged it appropriate to continue the process of reducing the Federal Reserve's securities holdings.
In considering the outlook for monetary policy, almost all participants agreed that, with the labor market still solid and current monetary policy moderately or modestly restrictive, the Committee was well positioned to respond in a timely way to potential economic developments. Participants agreed that monetary policy would be informed by a wide range of incoming data, the economic outlook, and the balance of risks. Participants assessed that the effects of higher tariffs had become more apparent in the prices of some goods but that their overall effects on economic activity and inflation remained to be seen. They also noted that it would take time to have more clarity on the magnitude and persistence of higher tariffs' effects on inflation. Even so, some participants emphasized that a great deal could be learned in coming months from incoming data, helping to inform their assessment of the balance of risks and the appropriate setting of the federal funds rate; at the same time, some noted that it would not be feasible or appropriate to wait for complete clarity on the tariffs' effects on inflation before adjusting the stance of monetary policy. Some participants stressed that the issue of the persistence of tariff effects on inflation would depend importantly on the stance of monetary policy. Several participants commented that the current target range for the federal funds rate may not be far above its neutral level; among the considerations cited in support of this assessment was the likelihood that broader financial conditions were either neutral or supportive of stronger economic activity.
In discussing risk-management considerations that could bear on the outlook for monetary policy, participants generally agreed that the upside risk to inflation and the downside risk to employment remained elevated. Participants noted that, if this year's higher tariffs were to generate a larger-than-expected or a more-persistent-than-anticipated increase in inflation, or if medium- or longer-term inflation expectations were to increase notably, then it would be appropriate to maintain a more restrictive stance of monetary policy than would otherwise be the case, especially if labor market conditions remained solid. By contrast, if labor market conditions were to weaken materially or if inflation were to come down further and inflation expectations remained well anchored, then it would be appropriate to establish a less restrictive stance of monetary policy than would otherwise be the case. Participants noted that the Committee might face difficult tradeoffs if elevated inflation proved to be more persistent while the outlook for the labor market weakened. Participants agreed that, if that situation were to occur, they would consider each variable's distance from the Committee's goal and the potentially different time horizons over which those respective gaps would be anticipated to close. Participants noted that, in this context, it was especially important to ensure that longer-term inflation expectations remained well anchored.
Several participants remarked on issues related to the Federal Reserve's balance sheet. Of those who commented, participants observed that balance sheet reduction had been proceeding smoothly thus far and that various indicators pointed to reserves being abundant. They agreed that, with reserves projected to decline amid the rebuilding of the TGA balance following the resolution of the debt limit situation, it was important to monitor money market conditions closely and to continue to evaluate how close reserves were to their ample level. A few participants also assessed that, in this environment, abrupt further declines in reserves could occur on key reporting and payment flow days. They noted that, if such events created pressures in money markets, the Federal Reserve's existing tools would help supply additional reserves and keep the effective federal funds rate within the target range. A couple of participants highlighted the role of the SRF in monetary policy implementationâas reflected in increased usage at the June quarter-endâand expressed support for further study of the possibility of central clearing of the SRF to enhance its effectiveness.
Committee Policy Actions
In their discussions of monetary policy for this meeting, members agreed that although swings in net exports had affected the data, recent indicators suggested that the growth of economic activity had moderated in the first half of the year. Members agreed that the unemployment rate had remained at a low level and that labor market conditions had remained solid. Members concurred that inflation remained somewhat elevated. Members agreed that uncertainty about the economic outlook remained elevated and that the Committee was attentive to the risks to both sides of its dual mandate.
In support of the Committee's goals, almost all members agreed to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. A couple of members preferred to lower the target range for the federal funds rate by 25 basis points at this meeting. These members judged that, excluding tariff effects, inflation was running close to the Committee's 2 percent objective and that higher tariffs were unlikely to have persistent effects on inflation. Furthermore, they assessed that downside risk to employment had meaningfully increased with the slowing of the growth of economic activity and consumer spending, and that some incoming data pointed to a weakening of labor market conditions, including low levels of private payroll gains and the concentration of payroll gains in a narrow set of industries that were less affected by the business cycle. Members agreed that in considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee would carefully assess incoming data, the evolving outlook, and the balance of risks. All members agreed that the postmeeting statement should affirm their strong commitment both to supporting maximum employment and to returning inflation to the Committee's 2 percent objective.
Members agreed that, in assessing the appropriate stance of monetary policy, the Committee would continue to monitor the implications of incoming information for the economic outlook. They would be prepared to adjust the stance of monetary policy as appropriate if risks emerged that could impede the attainment of the Committee's goals. Members also agreed that their assessments would take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
At the conclusion of the discussion, the Committee voted to direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.:
"Effective July 31, 2025, the Federal Open Market Committee directs the Desk to:
Undertake open market operations as necessary to maintain the federal funds rate in a target range of 4-1/4 to 4-1/2 percent.
Conduct standing overnight repurchase agreement operations with a minimum bid rate of 4.5 percent and with an aggregate operation limit of $500 billion.
Conduct standing overnight reverse repurchase agreement operations at an offering rate of 4.25 percent and with a per-counterparty limit of $160 billion per day.
Roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing in each calendar month that exceeds a cap of $5 billion per month. Redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap.
Reinvest the amount of principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities (MBS) received in each calendar month that exceeds a cap of $35 billion per month into Treasury securities to roughly match the maturity composition of Treasury securities outstanding.
Allow modest deviations from stated amounts for reinvestments, if needed for operational reasons."
The vote also encompassed approval of the statement below for release at 2:00 p.m.:
"Although swings in net exports continue to affect the data, recent indicators suggest that growth of economic activity moderated in the first half of the year. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate.
In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments."
Voting for this action: Jerome H. Powell, John C. Williams, Michael S. Barr, Susan M. Collins, Lisa D. Cook, Austan D. Goolsbee, Philip N. Jefferson, Alberto G. Musalem, and Jeffrey R. Schmid.
Voting against this action: Michelle W. Bowman and Christopher J. Waller.
Absent and not voting: Adriana D. Kugler
Governors Bowman and Waller preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting. Governor Bowman preferred at this meeting to lower the target range for the federal funds rate by 25 basis points to 4 to 4-1/4 percent in light of inflation moving considerably closer to the Committee's objective, after excluding temporary effects of tariffs, a labor market near full employment but with signs of less dynamism, and slowing economic growth this year. She also expressed her view that taking action to begin moving the policy rate at a gradual pace toward its neutral level would have proactively hedged against a further weakening in the economy and the risk of damage to the labor market.
Consistent with the Committee's decision to leave the target range for the federal funds rate unchanged, the Board of Governors of the Federal Reserve System voted unanimously to maintain the interest rate paid on reserve balances at 4.4 percent, effective July 31, 2025. The Board of Governors of the Federal Reserve System voted unanimously to approve the establishment of the primary credit rate at the existing level of 4.5 percent.
It was agreed that the next meeting of the Committee would be held on TuesdayâWednesday, September 16â17, 2025. The meeting adjourned at 10:15 a.m. on July 30, 2025.
Notation Vote
By notation vote completed on July 8, 2025, the Committee unanimously approved the minutes of the Committee meeting held on June 17â18, 2025.
Attendance
Jerome H. Powell, Chair
John C. Williams, Vice Chair
Michael S. Barr
Michelle W. Bowman
Susan M. Collins
Lisa D. Cook
Austan D. Goolsbee
Philip N. Jefferson
Alberto G. Musalem
Jeffrey R. Schmid
Christopher J. Waller
Beth M. Hammack, Neel Kashkari, Lorie K. Logan, Anna Paulson, and Sushmita Shukla, Alternate Members of the Committee
Thomas I. Barkin, Raphael W. Bostic, and Mary C. Daly, Presidents of the Federal Reserve Banks of Richmond, Atlanta, and San Francisco, respectively
Joshua Gallin, Secretary
Matthew M. Luecke, Deputy Secretary
Brian J. Bonis, Assistant Secretary
Michelle A. Smith, Assistant Secretary
Mark E. Van Der Weide, General Counsel
Richard Ostrander, Deputy General Counsel
Trevor A. Reeve, Economist
Stacey Tevlin, Economist
Beth Anne Wilson,2 Economist
Shaghil Ahmed, Kartik B. Athreya, Brian M. Doyle, Eric M. Engen, Carlos Garriga, Joseph W. Gruber, and Egon Zakrajšek, Associate Economists
Roberto Perli, Manager, System Open Market Account
Julie Ann Remache, Deputy Manager, System Open Market Account
Jose Acosta, Senior System Engineer II, Division of Information Technology, Board
Isaiah C. Ahn, Information Management Analyst, Division of Monetary Affairs, Board
Mary L. Aiken, Senior Associate Director, Division of Supervision and Regulation, Board
Gianni Amisano, Assistant Director, Division of Research and Statistics, Board
Roc Armenter, Executive Vice President, Federal Reserve Bank of Philadelphia
David M. Arseneau, Deputy Associate Director, Division of Financial Stability, Board
Alyssa Arute,3 Assistant Director, Division of Reserve Bank Operations and Payment Systems, Board
William F. Bassett, Senior Associate Director, Division of Financial Stability, Board
Michele Cavallo, Special Adviser to the Board, Division of Board Members, Board
Andrew Cohen,4 Special Adviser to the Board, Division of Board Members, Board
Daniel M. Covitz, Deputy Director, Division of Research and Statistics, Board
Marnie Gillis DeBoer,3 Senior Associate Director, Division of Monetary Affairs, Board
Wendy E. Dunn, Adviser, Division of Research and Statistics, Board
Eric C. Engstrom, Associate Director, Division of Monetary Affairs, Board
Laura J. Feiveson,5 Special Adviser to the Board, Division of Board Members, Board
Andrew Figura, Associate Director, Division of Research and Statistics, Board
Glenn Follette, Associate Director, Division of Research and Statistics, Board
Etienne Gagnon, Senior Associate Director, Division of International Finance, Board
Jonathan Glicoes, Senior Financial Institution Policy Analyst II, Division of Monetary Affairs, Board
Valerie S. Hinojosa, Section Chief, Division of Monetary Affairs, Board
Jane E. Ihrig, Special Adviser to the Board, Division of Board Members, Board
Margaret M. Jacobson, Senior Economist, Division of Monetary Affairs, Board
Michael T. Kiley, Deputy Director, Division of Monetary Affairs, Board
Don H. Kim, Senior Adviser, Division of Monetary Affairs, Board
Elizabeth Klee, Deputy Director, Division of Monetary Affairs, Board
Anna R. Kovner, Executive Vice President, Federal Reserve Bank of Richmond
Spencer D. Krane, Senior Vice President, Federal Reserve Bank of Chicago
Sylvain Leduc, Executive Vice President and Director of Economic Research, Federal Reserve Bank of San Francisco
Andreas Lehnert, Director, Division of Financial Stability, Board
Kurt F. Lewis, Special Adviser to the Chair, Division of Board Members, Board
Logan T. Lewis, Section Chief, Division of International Finance, Board
Geng Li, Assistant Director, Division of Research and Statistics, Board
Laura Lipscomb, Special Adviser to the Board, Division of Board Members, Board
Benjamin W. McDonough, Deputy Secretary and Ombudsman, Office of the Secretary, Board
Neil Mehrotra, Assistant Vice President, Federal Reserve Bank of Minneapolis
Ann E. Misback,6 Secretary, Office of the Secretary, Board
David Na, Lead Financial Institution Policy Analyst, Division of Monetary Affairs, Board
Edward Nelson, Senior Adviser, Division of Monetary Affairs, Board
Anna Nordstrom, Head of Markets, Federal Reserve Bank of New York
Alyssa T. O'Connor, Special Adviser to the Board, Division of Board Members, Board
Ekaterina Peneva, Assistant Director and Chief, Division of Research and Statistics, Board
Caterina Petrucco-Littleton, Special Adviser to the Board, Division of Board Members, Board
Damjan Pfajfar, Vice President, Federal Reserve Bank of Cleveland
Eugenio P. Pinto, Special Adviser to the Board, Division of Board Members, Board
Jordan Pollinger,3 Associate Director, Federal Reserve Bank of New York
Fabiola Ravazzolo,3 Capital Markets Trading and Policy Advisor, Federal Reserve Bank of New York
Kirk Schwarzbach,7 Special Assistant to the Board, Division of Board Members, Board
Zeynep Senyuz, Special Adviser to the Board, Division of Board Members, Board
Thiago Teixeira Ferreira, Special Adviser to the Board, Division of Board Members, Board
Mary H. Tian, Group Manager, Division of Monetary Affairs, Board
Annette Vissing-Jørgensen, Senior Adviser, Division of Monetary Affairs, Board
Jeffrey D. Walker,3 Senior Associate Director, Division of Reserve Bank Operations and Payment Systems, Board
Jonathan Willis, Vice President, Federal Reserve Bank of Atlanta
Rebecca Zarutskie, Senior Vice President, Federal Reserve Bank of Dallas
_______________________
Joshua Gallin
Secretary
1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes; the Board of Governors of the Federal Reserve System is referenced as the "Board" in these minutes. Return to text
2. Attended Tuesday's session only. Return to text
3. Attended through the discussion of developments in financial markets and open market operations. Return to text
4. Attended the discussion of economic developments and the outlook. Return to text
5. Attended through the discussion of developments in financial markets and open market operations, and from the discussion of current monetary policy through the end of the meeting. Return to text
6. Attended the discussion of the review of the monetary policy framework. Return to text
7. Attended through the discussion of developments in financial markets and open market operations through the end of the meeting. Return to text
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2025-06-18
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2025-06-18
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Statement
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Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook has diminished but remains elevated. The Committee is attentive to the risks to both sides of its dual mandate.
In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgageâbacked securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Austan D. Goolsbee; Philip N. Jefferson; Adriana D. Kugler; Alberto G. Musalem; Jeffrey R. Schmid; and Christopher J. Waller.
For media inquiries, please email [email protected] or call 202-452-2955.
Implementation Note issued June 18, 2025
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in Data Studio
FOMC Meeting Statements & Minutes
This repository automatically scrapes and aggregates the Federal Reserve FOMC meeting statements and minutes - creating a dataset that enables tracking US monetary policy changes through time.
It works by polling the website of the U.S. Federal Reserve on a periodic basis and scraping the new statements and minutes as they become available. The scraper runs in a scheduled GitHub Actions workflow, which is available here.
The dataset begins in the year 2000 and the textual data is presented as it is found on the website of the Federal Reserve.
Usage
The updated dataset is located in this repository at communications.csv. If found, new data is added on a weekly basis on Monday mornings.
Data description
Date- Date of the FOMC meeting.Release Date- Release date of the statement/minutes. Note that minutes are usually released with a ~3 week lag from the meeting date.Type- Communication type, either a statement or minutes.Text- The text content of each communication release.
Availability
This dataset is also available on Kaggle, together with related Jupyter notebooks.
Future meetings
The full calendar of FOMC meetings is available on the Federal Reserve website, from where future meeting dates can be extracted.
Related research
Monetary policy decisions shown in the FOMC meeting statements have been analyzed at length in academic research and found to have immediate effects on the volatility and direction of equity index prices[^1] and interest rates[^2]. [^1]: Rosa, C. (2011). Words that shake traders: The stock market's reaction to central bank communication in real time. Journal of Empirical Finance, 18(5), 915-934. [^2]: Gürkaynak, R. S., Sack, B., & Swanson, E. (2005). The sensitivity of long-term interest rates to economic news: Evidence and implications for macroeconomic models. American economic review, 95(1), 425-436.
Background information
The Federal Open Market Committee (FOMC) meets eight times during the year to make decisions regarding the implementation of monetary policy, with the aim of achieving the Federal Reserve's dual mandate: promoting maximum employment and maintaining stable prices (controlling inflation).
The FOMC meeting statement document is one of the main formal communication documents used by the Fed, and contains information about key interest rate decisions, an assessment of the economic outlook, a view on inflation as well as forward guidance. This information helps businesses, investors and the general public take monetary policy into account and make more informed economic decisions.
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